Correlation Between Wells Fargo and Axos Financial

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

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

Diversification Opportunities for Wells Fargo and Axos Financial

0.35

Correlation Coefficient

Wells Fargo  Axos Financial

Weak diversification

The 3 months correlation between Wells and Axos is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Axos Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axos Financial 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 Axos Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axos Financial has no effect on the direction of Wells Fargo i.e., Wells Fargo and Axos Financial go up and down completely randomly.

Pair Corralation between Wells Fargo and Axos Financial

Considering the 90-day investment horizon Wells Fargo is expected to generate 1.03 times more return on investment than Axos Financial. However, Wells Fargo is 1.03 times more volatile than Axos Financial. It trades about 0.04 of its potential returns per unit of risk. Axos Financial is currently generating about -0.08 per unit of risk. If you would invest  7,141  in Wells Fargo on December 26, 2024 and sell it today you would earn a total of  283.00  from holding Wells Fargo or generate 3.96% return on investment over 90 days.

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

Wells Fargo  vs.  Axos Financial

Wells Fargo

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Wells Fargo is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Axos Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Axos Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Wells Fargo and Axos Financial

The main advantage of trading using opposite Wells Fargo and Axos Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Axos Financial 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 Axos Financial will offset losses from the drop in Axos Financial's long position.

The idea behind Wells Fargo and Axos Financial 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..