Correlation Between AES and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both AES and Wells Fargo 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 AES and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Wells Fargo, you can compare the effects of market volatilities on AES and Wells Fargo 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 AES with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Wells Fargo.
Diversification Opportunities for AES and Wells Fargo
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AES and Wells is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and AES 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 The AES are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of AES i.e., AES and Wells Fargo go up and down completely randomly.
Pair Corralation between AES and Wells Fargo
Assuming the 90 days trading horizon The AES is expected to under-perform the Wells Fargo. In addition to that, AES is 1.03 times more volatile than Wells Fargo. It trades about -0.01 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.05 per unit of volatility. If you would invest 4,123 in Wells Fargo on January 19, 2024 and sell it today you would earn a total of 1,751 from holding Wells Fargo or generate 42.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.83% |
| Values | Daily Returns |
The AES vs. Wells Fargo
Performance |
| Timeline |
| AES |
| Wells Fargo |
AES and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Wells Fargo
The main advantage of trading using opposite AES and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| AES vs. Nok Airlines PCL | AES vs. United Airlines Holdings | AES vs. AUSTEVOLL SEAFOOD | AES vs. Tyson Foods |
| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
Check out your portfolio center.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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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