Correlation Between Alkindo Naratama and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Alkindo Naratama 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 Alkindo Naratama and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alkindo Naratama Tbk and Wells Fargo, you can compare the effects of market volatilities on Alkindo Naratama 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 Alkindo Naratama with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alkindo Naratama and Wells Fargo.
Diversification Opportunities for Alkindo Naratama and Wells Fargo
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Alkindo and Wells is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Alkindo Naratama Tbk and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Alkindo Naratama 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 Alkindo Naratama Tbk 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 Alkindo Naratama i.e., Alkindo Naratama and Wells Fargo go up and down completely randomly.
Pair Corralation between Alkindo Naratama and Wells Fargo
Assuming the 90 days trading horizon Alkindo Naratama is expected to generate 1.92 times less return on investment than Wells Fargo. In addition to that, Alkindo Naratama is 2.08 times more volatile than Wells Fargo. It trades about 0.06 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.23 per unit of volatility. If you would invest 3,886 in Wells Fargo on January 19, 2024 and sell it today you would earn a total of 1,832 from holding Wells Fargo or generate 47.14% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 93.44% |
Values | Daily Returns |
Alkindo Naratama Tbk vs. Wells Fargo
Performance |
Timeline |
Alkindo Naratama Tbk |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Wells Fargo |
Alkindo Naratama and Wells Fargo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alkindo Naratama and Wells Fargo
The main advantage of trading using opposite Alkindo Naratama and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkindo Naratama 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.The idea behind Alkindo Naratama Tbk and Wells Fargo 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.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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