Correlation Between Wells Fargo and Banco Bilbao

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

Diversification Opportunities for Wells Fargo and Banco Bilbao

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Wells and Banco is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Wells Fargo i.e., Wells Fargo and Banco Bilbao go up and down completely randomly.

Pair Corralation between Wells Fargo and Banco Bilbao

Assuming the 90 days trading horizon Wells Fargo is expected to under-perform the Banco Bilbao. But the stock apears to be less risky and, when comparing its historical volatility, Wells Fargo is 1.77 times less risky than Banco Bilbao. The stock trades about -0.09 of its potential returns per unit of risk. The Banco Bilbao Vizcaya is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  915.00  in Banco Bilbao Vizcaya on September 15, 2024 and sell it today you would earn a total of  40.00  from holding Banco Bilbao Vizcaya or generate 4.37% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wells Fargo  vs.  Banco Bilbao Vizcaya

 Performance 
       Timeline  
Wells Fargo 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Wells Fargo unveiled solid returns over the last few months and may actually be approaching a breakup point.
Banco Bilbao Vizcaya 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Banco Bilbao Vizcaya are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Bilbao may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wells Fargo and Banco Bilbao Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wells Fargo and Banco Bilbao

The main advantage of trading using opposite Wells Fargo and Banco Bilbao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Banco Bilbao 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 Banco Bilbao will offset losses from the drop in Banco Bilbao's long position.
The idea behind Wells Fargo and Banco Bilbao Vizcaya 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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