Correlation Between Wells Fargo and Longvie SA

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

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

Diversification Opportunities for Wells Fargo and Longvie SA

0.18

Correlation Coefficient

Wells Fargo  Longvie SA

Average diversification

The 3 months correlation between Wells and Longvie is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Longvie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Longvie SA 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 Longvie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Longvie SA has no effect on the direction of Wells Fargo i.e., Wells Fargo and Longvie SA go up and down completely randomly.

Pair Corralation between Wells Fargo and Longvie SA

Assuming the 90 days trading horizon Wells Fargo is expected to generate 0.86 times more return on investment than Longvie SA. However, Wells Fargo is 1.17 times less risky than Longvie SA. It trades about 0.12 of its potential returns per unit of risk. Longvie SA is currently generating about 0.01 per unit of risk. If you would invest  1,292,500  in Wells Fargo on September 12, 2024 and sell it today you would earn a total of  242,500  from holding Wells Fargo or generate 18.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Wells Fargo  vs.  Longvie SA

Wells Fargo

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Wells Fargo sustained solid returns over the last few months and may actually be approaching a breakup point.

Longvie SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Longvie SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Longvie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wells Fargo and Longvie SA

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

The idea behind Wells Fargo and Longvie SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.