Correlation Between Wells Fargo and Jpmorgan Mid

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

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

Diversification Opportunities for Wells Fargo and Jpmorgan Mid

0.95

Correlation Coefficient

Wells Fargo  Jpmorgan Mid

Almost no diversification

The 3 months correlation between Wells and Jpmorgan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Discovery and Jpmorgan Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jpmorgan Mid Cap 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 Discovery are associated (or correlated) with Jpmorgan Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jpmorgan Mid Cap has no effect on the direction of Wells Fargo i.e., Wells Fargo and Jpmorgan Mid go up and down completely randomly.

Pair Corralation between Wells Fargo and Jpmorgan Mid

Assuming the 90 days horizon Wells Fargo Discovery is expected to generate 1.43 times more return on investment than Jpmorgan Mid. However, Wells Fargo is 1.43 times more volatile than Jpmorgan Mid Cap. It trades about 0.22 of its potential returns per unit of risk. Jpmorgan Mid Cap is currently generating about 0.25 per unit of risk. If you would invest  2,804  in Wells Fargo Discovery on September 5, 2024 and sell it today you would earn a total of  455.00  from holding Wells Fargo Discovery or generate 16.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Wells Fargo Discovery  vs.  Jpmorgan Mid Cap

Wells Fargo Discovery

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Discovery are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wells Fargo showed solid returns over the last few months and may actually be approaching a breakup point.

Jpmorgan Mid Cap

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jpmorgan Mid Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Jpmorgan Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wells Fargo and Jpmorgan Mid

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

The idea behind Wells Fargo Discovery and Jpmorgan Mid Cap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .