Correlation Between Value Fund and Wells Fargo

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

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

Diversification Opportunities for Value Fund and Wells Fargo

0.75

Correlation Coefficient

Value Fund  Wells Fargo

Poor diversification

The 3 months correlation between Value and Wells is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor 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 Value Fund 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 Value Fund Investor 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 Value Fund i.e., Value Fund and Wells Fargo go up and down completely randomly.

Pair Corralation between Value Fund and Wells Fargo

Assuming the 90 days horizon Value Fund Investor is expected to under-perform the Wells Fargo. In addition to that, Value Fund is 1.15 times more volatile than Wells Fargo Advantage. It trades about -0.09 of its total potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.08 per unit of volatility. If you would invest  1,573  in Wells Fargo Advantage on September 12, 2024 and sell it today you would earn a total of  11.00  from holding Wells Fargo Advantage or generate 0.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Value Fund Investor  vs.  Wells Fargo Advantage

Value Fund Investor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Investor are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Advantage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Advantage are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Value Fund and Wells Fargo

The main advantage of trading using opposite Value Fund and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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 Value Fund Investor 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.