Correlation Between Wells Fargo and Great West

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

By analyzing existing cross correlation between Wells Fargo Core and Great West Goldman Sachs, you can compare the effects of market volatilities on Wells Fargo and Great West 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 Great West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Great West.

Diversification Opportunities for Wells Fargo and Great West

-0.49

Correlation Coefficient

Wells Fargo  Great West

Very good diversification

The 3 months correlation between Wells and Great is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Core and Great West Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Goldman 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 Core are associated (or correlated) with Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Goldman has no effect on the direction of Wells Fargo i.e., Wells Fargo and Great West go up and down completely randomly.

Pair Corralation between Wells Fargo and Great West

Assuming the 90 days horizon Wells Fargo Core is expected to under-perform the Great West. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wells Fargo Core is 2.66 times less risky than Great West. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Great West Goldman Sachs is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  941.00  in Great West Goldman Sachs on September 13, 2024 and sell it today you would earn a total of  58.00  from holding Great West Goldman Sachs or generate 6.16% return on investment over 90 days.

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

Wells Fargo Core  vs.  Great West Goldman Sachs

Wells Fargo Core

Risk-Adjusted Performance

0 of 100

Very Weak

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

Great West Goldman

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Goldman Sachs are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Great West 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 Great West

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

The idea behind Wells Fargo Core and Great West Goldman Sachs 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.