Correlation Between Rockwell Automation and Wells Fargo

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

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

Diversification Opportunities for Rockwell Automation and Wells Fargo

0.66

Correlation Coefficient

Rockwell Automation  Wells Fargo

Poor diversification

The 3 months correlation between Rockwell and Wells is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Automation and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Rockwell Automation 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 Rockwell Automation 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 Rockwell Automation i.e., Rockwell Automation and Wells Fargo go up and down completely randomly.

Pair Corralation between Rockwell Automation and Wells Fargo

Considering the 90-day investment horizon Rockwell Automation is expected to under-perform the Wells Fargo. But the stock apears to be less risky and, when comparing its historical volatility, Rockwell Automation is 1.13 times less risky than Wells Fargo. The stock trades about -0.21 of its potential returns per unit of risk. The Wells Fargo is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,205  in Wells Fargo on October 11, 2024 and sell it today you would lose (48.00) from holding Wells Fargo or give up 0.67% of portfolio value over 90 days.

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

Rockwell Automation  vs.  Wells Fargo

Rockwell Automation

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rockwell Automation are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Rockwell Automation is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Wells Fargo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Wells Fargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rockwell Automation and Wells Fargo

The main advantage of trading using opposite Rockwell Automation and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rockwell Automation 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 Rockwell Automation 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.