Correlation Between Wells Fargo and VeriSign

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

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

Diversification Opportunities for Wells Fargo and VeriSign

0.34

Correlation Coefficient

Wells Fargo  VeriSign

Weak diversification

The 3 months correlation between Wells and VeriSign is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and VeriSign in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeriSign 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 VeriSign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeriSign has no effect on the direction of Wells Fargo i.e., Wells Fargo and VeriSign go up and down completely randomly.

Pair Corralation between Wells Fargo and VeriSign

Considering the 90-day investment horizon Wells Fargo is expected to generate 10.34 times less return on investment than VeriSign. In addition to that, Wells Fargo is 1.04 times more volatile than VeriSign. It trades about 0.02 of its total potential returns per unit of risk. VeriSign is currently generating about 0.23 per unit of volatility. If you would invest  18,191  in VeriSign on October 26, 2024 and sell it today you would earn a total of  2,725  from holding VeriSign or generate 14.98% 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.  VeriSign

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 unsteady technical and fundamental indicators, Wells Fargo exhibited solid returns over the last few months and may actually be approaching a breakup point.

VeriSign

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, VeriSign displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wells Fargo and VeriSign

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

The idea behind Wells Fargo and VeriSign 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.