Correlation Between Mfs Mid and Wells Fargo

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

By analyzing existing cross correlation between Mfs Mid Cap and Wells Fargo Advantage, you can compare the effects of market volatilities on Mfs Mid and Wells Fargo 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 Mfs Mid with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs Mid and Wells Fargo.

Diversification Opportunities for Mfs Mid and Wells Fargo

0.93

Correlation Coefficient

Mfs Mid  Wells Fargo

Almost no diversification

The 3 months correlation between Mfs and Wells is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Mfs Mid Cap and Wells Fargo Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Advantage and Mfs Mid 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 Mfs Mid Cap are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Advantage has no effect on the direction of Mfs Mid i.e., Mfs Mid and Wells Fargo go up and down completely randomly.

Pair Corralation between Mfs Mid and Wells Fargo

Assuming the 90 days horizon Mfs Mid Cap is expected to generate 0.71 times more return on investment than Wells Fargo. However, Mfs Mid Cap is 1.41 times less risky than Wells Fargo. It trades about 0.24 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.13 per unit of risk. If you would invest  3,146  in Mfs Mid Cap on September 4, 2024 and sell it today you would earn a total of  423.00  from holding Mfs Mid Cap or generate 13.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Mfs Mid Cap  vs.  Wells Fargo Advantage

Mfs Mid Cap

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Mid Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Mfs Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Wells Fargo Advantage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Advantage are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wells Fargo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Mfs Mid and Wells Fargo

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

The idea behind Mfs Mid Cap and Wells Fargo Advantage 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.