Correlation Between Wells Fargo and Walmart
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Advantage and Walmart, you can compare the effects of market volatilities on Wells Fargo and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Walmart.
Diversification Opportunities for Wells Fargo and Walmart
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and Walmart is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Advantage are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Wells Fargo i.e., Wells Fargo and Walmart go up and down completely randomly.
Pair Corralation between Wells Fargo and Walmart
Assuming the 90 days horizon Wells Fargo is expected to generate 4.56 times less return on investment than Walmart. But when comparing it to its historical volatility, Wells Fargo Advantage is 8.67 times less risky than Walmart. It trades about 0.07 of its potential returns per unit of risk. Walmart is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 4,854 in Walmart on January 26, 2024 and sell it today you would earn a total of 1,133 from holding Walmart or generate 23.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Walmart
Performance |
| Timeline |
| Wells Fargo Advantage |
| Walmart |
Wells Fargo and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Walmart
The main advantage of trading using opposite Wells Fargo and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Ultra |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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