Correlation Between Wells Fargo and First Trust
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Diversified and First Trust Short, you can compare the effects of market volatilities on Wells Fargo and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and First Trust.
Diversification Opportunities for Wells Fargo and First Trust
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and First is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Diversified and First Trust Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Short 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 Diversified are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Short has no effect on the direction of Wells Fargo i.e., Wells Fargo and First Trust go up and down completely randomly.
Pair Corralation between Wells Fargo and First Trust
Assuming the 90 days horizon Wells Fargo Diversified is expected to generate 4.97 times more return on investment than First Trust. However, Wells Fargo is 4.97 times more volatile than First Trust Short. It trades about 0.48 of its potential returns per unit of risk. First Trust Short is currently generating about 0.42 per unit of risk. If you would invest 1,154 in Wells Fargo Diversified on April 18, 2025 and sell it today you would earn a total of 308.00 from holding Wells Fargo Diversified or generate 26.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Diversified vs. First Trust Short
Performance |
| Timeline |
| Wells Fargo Diversified |
| First Trust Short |
Wells Fargo and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and First Trust
The main advantage of trading using opposite Wells Fargo and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Ultra |
| First Trust vs. T Rowe Price | First Trust vs. Deutsche Multi Asset Moderate | First Trust vs. Voya Target Retirement | First Trust vs. Jpmorgan Smartretirement 2035 |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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