Correlation Between Wells Fargo and Microsoft
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Microsoft, you can compare the effects of market volatilities on Wells Fargo and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Microsoft.
Diversification Opportunities for Wells Fargo and Microsoft
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wells and Microsoft is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Wells Fargo i.e., Wells Fargo and Microsoft go up and down completely randomly.
Pair Corralation between Wells Fargo and Microsoft
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.1 times more return on investment than Microsoft. However, Wells Fargo is 1.1 times more volatile than Microsoft. It trades about 0.23 of its potential returns per unit of risk. Microsoft is currently generating about 0.02 per unit of risk. If you would invest 4,997 in Wells Fargo on January 26, 2024 and sell it today you would earn a total of 1,063 from holding Wells Fargo or generate 21.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Microsoft
Performance |
| Timeline |
| Wells Fargo |
| Microsoft |
Wells Fargo and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Microsoft
The main advantage of trading using opposite Wells Fargo and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft'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 |
| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Stocks Directory Find actively traded stocks across global markets |