Correlation Between Wells Fargo and Workday

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

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

Diversification Opportunities for Wells Fargo and Workday

-0.83

Correlation Coefficient

Wells Fargo  Workday

Pay attention - limited upside

The 3 months correlation between Wells and Workday is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Workday in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workday 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 Workday. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workday has no effect on the direction of Wells Fargo i.e., Wells Fargo and Workday go up and down completely randomly.

Pair Corralation between Wells Fargo and Workday

Considering the 90-day investment horizon Wells Fargo is expected to generate 0.84 times more return on investment than Workday. However, Wells Fargo is 1.18 times less risky than Workday. It trades about 0.25 of its potential returns per unit of risk. Workday is currently generating about 0.09 per unit of risk. If you would invest  3,899  in Wells Fargo on January 30, 2024 and sell it today you would earn a total of  2,092  from holding Wells Fargo or generate 53.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Wells Fargo  vs.  Workday

Wells Fargo

Risk-Adjusted Performance

15 of 100

Solid

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.

Workday

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Workday has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Wells Fargo and Workday

The main advantage of trading using opposite Wells Fargo and Workday positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Workday 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 Workday will offset losses from the drop in Workday's long position.

The idea behind Wells Fargo and Workday 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.