Correlation Between Wells Fargo and Visa
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Visa 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 Visa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Visa Class A, you can compare the effects of market volatilities on Wells Fargo and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Visa.
Diversification Opportunities for Wells Fargo and Visa
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wells and Visa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Wells Fargo i.e., Wells Fargo and Visa go up and down completely randomly.
Pair Corralation between Wells Fargo and Visa
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.51 times more return on investment than Visa. However, Wells Fargo is 1.51 times more volatile than Visa Class A. It trades about 0.21 of its potential returns per unit of risk. Visa Class A is currently generating about -0.41 per unit of risk. If you would invest 5,730 in Wells Fargo on January 20, 2024 and sell it today you would earn a total of 305.00 from holding Wells Fargo or generate 5.32% 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. Visa Class A
Performance |
| Timeline |
| Wells Fargo |
| Visa Class A |
Wells Fargo and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Visa
The main advantage of trading using opposite Wells Fargo and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa'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 |
| Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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