Correlation Between Ethereum and Wells Fargo

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

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

Diversification Opportunities for Ethereum and Wells Fargo

0.85

Correlation Coefficient

Ethereum  Wells Fargo

Very poor diversification

The 3 months correlation between Ethereum and Wells is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Ethereum 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 Ethereum 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 Ethereum i.e., Ethereum and Wells Fargo go up and down completely randomly.

Pair Corralation between Ethereum and Wells Fargo

Assuming the 90 days trading horizon Ethereum is expected to under-perform the Wells Fargo. In addition to that, Ethereum is 5.16 times more volatile than Wells Fargo. It trades about -0.06 of its total potential returns per unit of risk. Wells Fargo is currently generating about -0.08 per unit of volatility. If you would invest  147,900  in Wells Fargo on October 10, 2024 and sell it today you would lose (1,700) from holding Wells Fargo or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.91%
Values	Daily Returns

Ethereum  vs.  Wells Fargo

Ethereum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Wells Fargo

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Wells Fargo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum and Wells Fargo

The main advantage of trading using opposite Ethereum and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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 Ethereum 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.

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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..