Correlation Between Wells Fargo and STELLA JONES
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and STELLA JONES 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 STELLA JONES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between West Fraser Timber and STELLA JONES INC, you can compare the effects of market volatilities on Wells Fargo and STELLA JONES 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 STELLA JONES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and STELLA JONES.
Diversification Opportunities for Wells Fargo and STELLA JONES
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Wells and STELLA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding West Fraser Timber and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC 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 West Fraser Timber are associated (or correlated) with STELLA JONES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of Wells Fargo i.e., Wells Fargo and STELLA JONES go up and down completely randomly.
Pair Corralation between Wells Fargo and STELLA JONES
Assuming the 90 days horizon West Fraser Timber is expected to under-perform the STELLA JONES. But the stock apears to be less risky and, when comparing its historical volatility, West Fraser Timber is 1.0 times less risky than STELLA JONES. The stock trades about -0.02 of its potential returns per unit of risk. The STELLA JONES INC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 4,203 in STELLA JONES INC on April 24, 2025 and sell it today you would earn a total of 777.00 from holding STELLA JONES INC or generate 18.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
West Fraser Timber vs. STELLA JONES INC
Performance |
Timeline |
West Fraser Timber |
STELLA JONES INC |
Wells Fargo and STELLA JONES Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wells Fargo and STELLA JONES
The main advantage of trading using opposite Wells Fargo and STELLA JONES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, STELLA JONES 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 STELLA JONES will offset losses from the drop in STELLA JONES's long position.Wells Fargo vs. Svenska Cellulosa Aktiebolaget | Wells Fargo vs. SVENSKA CELLULO B | Wells Fargo vs. UFP Industries | Wells Fargo vs. Rayonier |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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