Correlation Between Regions Financial and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Regions Financial 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 Regions Financial and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regions Financial and Wells Fargo, you can compare the effects of market volatilities on Regions Financial 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 Regions Financial with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and Wells Fargo.
Diversification Opportunities for Regions Financial and Wells Fargo
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regions and Wells is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Wells Fargo go up and down completely randomly.
Pair Corralation between Regions Financial and Wells Fargo
Allowing for the 90-day total investment horizon Regions Financial is expected to generate 1.24 times less return on investment than Wells Fargo. In addition to that, Regions Financial is 1.41 times more volatile than Wells Fargo. It trades about 0.14 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.24 per unit of volatility. If you would invest 3,886 in Wells Fargo on January 20, 2024 and sell it today you would earn a total of 1,988 from holding Wells Fargo or generate 51.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regions Financial vs. Wells Fargo
Performance |
| Timeline |
| Regions Financial |
| Wells Fargo |
Regions Financial and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regions Financial and Wells Fargo
The main advantage of trading using opposite Regions Financial and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Stocks Directory Find actively traded stocks across global markets | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |