Correlation Between Perusahaan Perseroan and Wells Fargo

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

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

Diversification Opportunities for Perusahaan Perseroan and Wells Fargo

0.47

Correlation Coefficient

Perusahaan Perseroan  Wells Fargo

Very weak diversification

The 3 months correlation between Perusahaan and Wells is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Perusahaan Perseroan PT and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Perusahaan Perseroan 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 Perusahaan Perseroan PT 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 Perusahaan Perseroan i.e., Perusahaan Perseroan and Wells Fargo go up and down completely randomly.

Pair Corralation between Perusahaan Perseroan and Wells Fargo

Assuming the 90 days horizon Perusahaan Perseroan PT is expected to under-perform the Wells Fargo. But the stock apears to be less risky and, when comparing its historical volatility, Perusahaan Perseroan PT is 1.03 times less risky than Wells Fargo. The stock trades about -0.09 of its potential returns per unit of risk. The Wells Fargo is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,705  in Wells Fargo on December 30, 2024 and sell it today you would lose (214.00) from holding Wells Fargo or give up 3.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Perusahaan Perseroan PT  vs.  Wells Fargo

Perusahaan Perseroan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perusahaan Perseroan PT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Wells Fargo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Wells Fargo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Perusahaan Perseroan and Wells Fargo

The main advantage of trading using opposite Perusahaan Perseroan and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perusahaan Perseroan 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 Perusahaan Perseroan PT 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.