Correlation Between Wells Fargo and Albemarle

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Albemarle 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 Albemarle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Albemarle, you can compare the effects of market volatilities on Wells Fargo and Albemarle 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 Albemarle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Albemarle.

Diversification Opportunities for Wells Fargo and Albemarle

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Wells and Albemarle is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle 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 Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Wells Fargo i.e., Wells Fargo and Albemarle go up and down completely randomly.

Pair Corralation between Wells Fargo and Albemarle

If you would invest  5,857  in Wells Fargo on September 4, 2022 and sell it today you would earn a total of  115.00  from holding Wells Fargo or generate 1.96% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy4.76%
ValuesDaily Returns

Wells Fargo  vs.  Albemarle

 Performance (%) 
       Timeline  
Wells Fargo 
Wells Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Wells Fargo may actually be approaching a critical reversion point that can send shares even higher in January 2023.

Wells Price Channel

Albemarle 
Albemarle Performance
0 of 100
Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Albemarle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo and Albemarle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Wells Fargo and Albemarle

The main advantage of trading using opposite Wells Fargo and Albemarle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Albemarle 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 Albemarle will offset losses from the drop in Albemarle's long position.
Wells Fargo vs. Petro Rio SA
Wells Fargo vs. Ambev SA
The idea behind Wells Fargo and Albemarle 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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Albemarle as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Albemarle's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Albemarle's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Albemarle.
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

Other Complementary Tools

Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Companies Directory
Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Portfolio Suggestion
Get suggestions outside of your existing asset allocation including your own model portfolios
Go