Correlation Between Wells Fargo and Texas Gulf
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Texas Gulf 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 Texas Gulf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Texas Gulf Energy, you can compare the effects of market volatilities on Wells Fargo and Texas Gulf 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 Texas Gulf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Texas Gulf.
Diversification Opportunities for Wells Fargo and Texas Gulf
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wells and Texas is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Texas Gulf Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Gulf Energy 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 Texas Gulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Gulf Energy has no effect on the direction of Wells Fargo i.e., Wells Fargo and Texas Gulf go up and down completely randomly.
Pair Corralation between Wells Fargo and Texas Gulf
Considering the 90-day investment horizon Wells Fargo is expected to generate 0.7 times more return on investment than Texas Gulf. However, Wells Fargo is 1.44 times less risky than Texas Gulf. It trades about 0.26 of its potential returns per unit of risk. Texas Gulf Energy is currently generating about 0.18 per unit of risk. If you would invest 4,914 in Wells Fargo on January 24, 2024 and sell it today you would earn a total of 1,196 from holding Wells Fargo or generate 24.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Texas Gulf Energy
Performance |
| Timeline |
| Wells Fargo |
| Texas Gulf Energy |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Wells Fargo and Texas Gulf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Texas Gulf
The main advantage of trading using opposite Wells Fargo and Texas Gulf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Texas Gulf 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 Texas Gulf will offset losses from the drop in Texas Gulf's long position.| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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