Correlation Between Wells Fargo and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Chevron Corp, you can compare the effects of market volatilities on Wells Fargo and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Chevron Corp.
Diversification Opportunities for Wells Fargo and Chevron Corp
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Chevron is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Wells Fargo i.e., Wells Fargo and Chevron Corp go up and down completely randomly.
Pair Corralation between Wells Fargo and Chevron Corp
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.33 times more return on investment than Chevron Corp. However, Wells Fargo is 1.33 times more volatile than Chevron Corp. It trades about 0.14 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.04 per unit of risk. If you would invest 5,701 in Wells Fargo on January 19, 2024 and sell it today you would earn a total of 173.00 from holding Wells Fargo or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Chevron Corp
Performance |
| Timeline |
| Wells Fargo |
| Chevron Corp |
Wells Fargo and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Chevron Corp
The main advantage of trading using opposite Wells Fargo and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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