Correlation Between Wells Fargo and National Cinemedia

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Can any of the company-specific risk be diversified away by investing in both Wells Fargo and National Cinemedia 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 National Cinemedia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and National Cinemedia, you can compare the effects of market volatilities on Wells Fargo and National Cinemedia 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 National Cinemedia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and National Cinemedia.

Diversification Opportunities for Wells Fargo and National Cinemedia

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Wells and National is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and National Cinemedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Cinemedia 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 National Cinemedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Cinemedia has no effect on the direction of Wells Fargo i.e., Wells Fargo and National Cinemedia go up and down completely randomly.

Pair Corralation between Wells Fargo and National Cinemedia

Considering the 90-day investment horizon Wells Fargo is expected to generate 0.4 times more return on investment than National Cinemedia. However, Wells Fargo is 2.51 times less risky than National Cinemedia. It trades about -0.18 of its potential returns per unit of risk. National Cinemedia is currently generating about -0.54 per unit of risk. If you would invest  4,371  in Wells Fargo on July 2, 2022 and sell it today you would lose (321.00)  from holding Wells Fargo or give up 7.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Wells Fargo  vs.  National Cinemedia

 Performance (%) 
       Timeline  
Wells Fargo 
Wells Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Wells Fargo is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Wells Price Channel

National Cinemedia 
National Performance
0 of 100
Over the last 90 days National Cinemedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

National Price Channel

Wells Fargo and National Cinemedia Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wells Fargo and National Cinemedia

The main advantage of trading using opposite Wells Fargo and National Cinemedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, National Cinemedia 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 National Cinemedia will offset losses from the drop in National Cinemedia's long position.
Wells Fargo vs. Amazon Inc
The idea behind Wells Fargo and National Cinemedia 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.
National Cinemedia vs. Amazon Inc
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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