Correlation Between Wex and Dave

Can any of the company-specific risk be diversified away by investing in both Wex and Dave at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Wex and Dave into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wex Inc and Dave Inc, you can compare the effects of market volatilities on Wex and Dave and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Wex with a short position of Dave. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wex and Dave.

Diversification Opportunities for Wex and Dave

0.92

Correlation Coefficient

Wex  Dave

Almost no diversification

The 3 months correlation between Wex and Dave is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Wex Inc and Dave Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dave Inc and Wex is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Wex Inc are associated (or correlated) with Dave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dave Inc has no effect on the direction of Wex i.e., Wex and Dave go up and down completely randomly.

Pair Corralation between Wex and Dave

Considering the 90-day investment horizon Wex Inc is expected to under-perform the Dave. But the stock apears to be less risky and, when comparing its historical volatility, Wex Inc is 4.87 times less risky than Dave. The stock trades about 0.0 of its potential returns per unit of risk. The Dave Inc is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,958  in Dave Inc on January 25, 2024 and sell it today you would earn a total of  229.00  from holding Dave Inc or generate 5.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Wex Inc  vs.  Dave Inc

Wex Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wex Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, Wex showed solid returns over the last few months and may actually be approaching a breakup point.

Dave Inc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dave Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Dave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wex and Dave

The main advantage of trading using opposite Wex and Dave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wex position performs unexpectedly, Dave can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dave will offset losses from the drop in Dave's long position.

The idea behind Wex Inc and Dave Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.