Correlation Between Wells Fargo and Southern Copper
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Southern Copper 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 Southern Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Southern Copper, you can compare the effects of market volatilities on Wells Fargo and Southern Copper 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 Southern Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Southern Copper.
Diversification Opportunities for Wells Fargo and Southern Copper
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Wells and Southern is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Southern Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Copper 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 Southern Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Copper has no effect on the direction of Wells Fargo i.e., Wells Fargo and Southern Copper go up and down completely randomly.
Pair Corralation between Wells Fargo and Southern Copper
Assuming the 90 days trading horizon Wells Fargo is expected to generate 1.01 times more return on investment than Southern Copper. However, Wells Fargo is 1.01 times more volatile than Southern Copper. It trades about 0.07 of its potential returns per unit of risk. Southern Copper is currently generating about 0.06 per unit of risk. If you would invest 86,317 in Wells Fargo on October 26, 2024 and sell it today you would earn a total of 70,183 from holding Wells Fargo or generate 81.31% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Wells Fargo vs. Southern Copper
Performance |
Timeline |
Wells Fargo |
Southern Copper |
Wells Fargo and Southern Copper Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wells Fargo and Southern Copper
The main advantage of trading using opposite Wells Fargo and Southern Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Southern Copper 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 Southern Copper will offset losses from the drop in Southern Copper's long position.Wells Fargo vs. Grupo Sports World | Wells Fargo vs. McEwen Mining | Wells Fargo vs. First Majestic Silver | Wells Fargo vs. Applied Materials |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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