Correlation Between Mastercard and Wells Fargo

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Mastercard 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 Mastercard and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mastercard and Wells Fargo, you can compare the effects of market volatilities on Mastercard 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 Mastercard with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard and Wells Fargo.

Diversification Opportunities for Mastercard and Wells Fargo

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Mastercard and Wells is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Mastercard 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 Mastercard 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 Mastercard i.e., Mastercard and Wells Fargo go up and down completely randomly.

Pair Corralation between Mastercard and Wells Fargo

Allowing for the 90-day total investment horizon Mastercard is expected to generate 9.19 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Mastercard is 1.08 times less risky than Wells Fargo. It trades about 0.04 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  5,472  in Wells Fargo on December 30, 2023 and sell it today you would earn a total of  324.00  from holding Wells Fargo or generate 5.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Mastercard  vs.  Wells Fargo

 Performance 
       Timeline  
Mastercard 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Mastercard sustained solid returns over the last few months and may actually be approaching a breakup point.
Wells Fargo 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
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 uncertain technical and fundamental indicators, Wells Fargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mastercard and Wells Fargo Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mastercard and Wells Fargo

The main advantage of trading using opposite Mastercard and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastercard 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 Mastercard 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

Other Complementary Tools

Odds Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Alpha Finder
Use alpha and beta coefficients to find investment opportunities after accounting for the risk
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Price Transformation
Use Price Transformation models to analyze the depth of different equity instruments across global markets
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Insider Screener
Find insiders across different sectors to evaluate their impact on performance