Correlation Between Apple and Wells Fargo

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Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc CDR and Wall Financial, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Wells Fargo.

Diversification Opportunities for Apple and Wells Fargo

-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Apple and Wells is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and Wall Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wall Financial and Apple 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 Apple Inc CDR 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 Wall Financial has no effect on the direction of Apple i.e., Apple and Wells Fargo go up and down completely randomly.

Pair Corralation between Apple and Wells Fargo

Assuming the 90 days trading horizon Apple Inc CDR is expected to generate 0.58 times more return on investment than Wells Fargo. However, Apple Inc CDR is 1.72 times less risky than Wells Fargo. It trades about 0.08 of its potential returns per unit of risk. Wall Financial is currently generating about -0.15 per unit of risk. If you would invest  3,279  in Apple Inc CDR on September 3, 2024 and sell it today you would earn a total of  196.00  from holding Apple Inc CDR or generate 5.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Apple Inc CDR  vs.  Wall Financial

 Performance 
       Timeline  
Apple Inc CDR 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Apple is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Wall Financial 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Wall Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Apple and Wells Fargo Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apple and Wells Fargo

The main advantage of trading using opposite Apple and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc CDR and Wall Financial 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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