Correlation Between Wells Fargo and Globex Mining

Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Globex Mining 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 Wells Fargo and Globex Mining into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wells Fargo and Globex Mining Enterprises, you can compare the effects of market volatilities on Wells Fargo and Globex Mining 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 Wells Fargo with a short position of Globex Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Globex Mining.

Diversification Opportunities for Wells Fargo and Globex Mining

0.06

Correlation Coefficient

Wells Fargo  Globex Mining

Significant diversification

The 3 months correlation between Wells and Globex is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Globex Mining Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globex Mining Enterprises and Wells Fargo 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 Wells Fargo are associated (or correlated) with Globex Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globex Mining Enterprises has no effect on the direction of Wells Fargo i.e., Wells Fargo and Globex Mining go up and down completely randomly.

Pair Corralation between Wells Fargo and Globex Mining

Considering the 90-day investment horizon Wells Fargo is expected to generate 0.57 times more return on investment than Globex Mining. However, Wells Fargo is 1.74 times less risky than Globex Mining. It trades about 0.04 of its potential returns per unit of risk. Globex Mining Enterprises is currently generating about -0.01 per unit of risk. If you would invest  4,213  in Wells Fargo on January 17, 2024 and sell it today you would earn a total of  1,484  from holding Wells Fargo or generate 35.22% return on investment over 90 days.

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

Wells Fargo  vs.  Globex Mining Enterprises

Wells Fargo

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Wells Fargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Globex Mining Enterprises

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Globex Mining may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Wells Fargo and Globex Mining

The main advantage of trading using opposite Wells Fargo and Globex Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Globex Mining 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 Globex Mining will offset losses from the drop in Globex Mining's long position.

The idea behind Wells Fargo and Globex Mining Enterprises 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.