Correlation Between Wells Fargo and Hartford Midcap

Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Hartford Midcap 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 Hartford Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wells Fargo Emerging and The Hartford Midcap, you can compare the effects of market volatilities on Wells Fargo and Hartford Midcap 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 Hartford Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Hartford Midcap.

Diversification Opportunities for Wells Fargo and Hartford Midcap

-0.34

Correlation Coefficient

Wells Fargo  Hartford Midcap

Very good diversification

The 3 months correlation between Wells and Hartford is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Emerging and The Hartford Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hartford Midcap 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 Emerging are associated (or correlated) with Hartford Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hartford Midcap has no effect on the direction of Wells Fargo i.e., Wells Fargo and Hartford Midcap go up and down completely randomly.

Pair Corralation between Wells Fargo and Hartford Midcap

Assuming the 90 days horizon Wells Fargo Emerging is expected to generate 0.41 times more return on investment than Hartford Midcap. However, Wells Fargo Emerging is 2.45 times less risky than Hartford Midcap. It trades about -0.18 of its potential returns per unit of risk. The Hartford Midcap is currently generating about -0.31 per unit of risk. If you would invest  2,680  in Wells Fargo Emerging on September 23, 2024 and sell it today you would lose (65.00) from holding Wells Fargo Emerging or give up 2.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Wells Fargo Emerging  vs.  The Hartford Midcap

Wells Fargo Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hartford Midcap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Hartford Midcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Hartford Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wells Fargo and Hartford Midcap

The main advantage of trading using opposite Wells Fargo and Hartford Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Hartford Midcap 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 Hartford Midcap will offset losses from the drop in Hartford Midcap's long position.

The idea behind Wells Fargo Emerging and The Hartford Midcap 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..