Correlation Between Wells Fargo and Walmart
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Walmart 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 Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Walmart, you can compare the effects of market volatilities on Wells Fargo and Walmart 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 Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Walmart.
Diversification Opportunities for Wells Fargo and Walmart
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Walmart is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Wells Fargo i.e., Wells Fargo and Walmart go up and down completely randomly.
Pair Corralation between Wells Fargo and Walmart
Considering the 90-day investment horizon Wells Fargo is expected to generate 1.69 times more return on investment than Walmart. However, Wells Fargo is 1.69 times more volatile than Walmart. It trades about 0.12 of its potential returns per unit of risk. Walmart is currently generating about -0.25 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 144.00 from holding Wells Fargo or generate 2.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Walmart
Performance |
| Timeline |
| Wells Fargo |
| Walmart |
Wells Fargo and Walmart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Walmart
The main advantage of trading using opposite Wells Fargo and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart'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 |
| Walmart vs. Aquagold International | Walmart vs. Morningstar Unconstrained Allocation | Walmart vs. Thrivent High Yield | Walmart vs. Via Renewables |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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