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 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
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo 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 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
Considering the 90-day investment horizon Wells Fargo is expected to generate 9.24 times more return on investment than First Trust. However, Wells Fargo is 9.24 times more volatile than First Trust Short. It trades about 0.23 of its potential returns per unit of risk. First Trust Short is currently generating about 0.4 per unit of risk. If you would invest 6,587 in Wells Fargo on April 22, 2025 and sell it today you would earn a total of 1,477 from holding Wells Fargo or generate 22.42% 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 vs. First Trust Short
Performance |
| Timeline |
| Wells Fargo |
| 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.The idea behind Wells Fargo and First Trust Short 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.| First Trust vs. Rationalpier 88 Convertible | First Trust vs. Putnam Convertible Securities | First Trust vs. Allianzgi Convertible Income | First Trust vs. Calamos Dynamic Convertible |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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