Correlation Between Wells Fargo and Baron Emerging

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

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

Diversification Opportunities for Wells Fargo and Baron Emerging

0.08

Correlation Coefficient

Wells Fargo  Baron Emerging

Significant diversification

The 3 months correlation between Wells and Baron is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Special and Baron Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baron Emerging Markets 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 Special are associated (or correlated) with Baron Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baron Emerging Markets has no effect on the direction of Wells Fargo i.e., Wells Fargo and Baron Emerging go up and down completely randomly.

Pair Corralation between Wells Fargo and Baron Emerging

Assuming the 90 days horizon Wells Fargo Special is expected to generate 0.71 times more return on investment than Baron Emerging. However, Wells Fargo Special is 1.4 times less risky than Baron Emerging. It trades about 0.13 of its potential returns per unit of risk. Baron Emerging Markets is currently generating about 0.04 per unit of risk. If you would invest  5,219  in Wells Fargo Special on September 4, 2024 and sell it today you would earn a total of  295.00  from holding Wells Fargo Special or generate 5.65% return on investment over 90 days.

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

Wells Fargo Special  vs.  Baron Emerging Markets

Wells Fargo Special

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Special are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Baron Emerging Markets

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Baron Emerging Markets are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Baron Emerging 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 Baron Emerging

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

The idea behind Wells Fargo Special and Baron Emerging Markets 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.