Correlation Between Big Buck and Wells Fargo

Can any of the company-specific risk be diversified away by investing in both Big Buck 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 Big Buck and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Big Buck Brewery and Wells Fargo, you can compare the effects of market volatilities on Big Buck 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 Big Buck with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Buck and Wells Fargo.

Diversification Opportunities for Big Buck and Wells Fargo

0.0

Correlation Coefficient

Big Buck  Wells Fargo

Pay attention - limited upside

The 3 months correlation between Big and Wells is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Big Buck Brewery and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Big Buck 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 Big Buck Brewery 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 Big Buck i.e., Big Buck and Wells Fargo go up and down completely randomly.

Pair Corralation between Big Buck and Wells Fargo

If you would invest  5,761  in Wells Fargo on January 30, 2024 and sell it today you would earn a total of  230.00  from holding Wells Fargo or generate 3.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Big Buck Brewery  vs.  Wells Fargo

Big Buck Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Buck Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Big Buck is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Wells Fargo

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Wells Fargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Big Buck and Wells Fargo

The main advantage of trading using opposite Big Buck and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big Buck 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 Big Buck Brewery 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.