Correlation Between Wells Fargo and Catalyst/millburn

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

By analyzing existing cross correlation between Wells Fargo Funds and Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on Wells Fargo and Catalyst/millburn 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 Catalyst/millburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Catalyst/millburn.

Diversification Opportunities for Wells Fargo and Catalyst/millburn

0.73

Correlation Coefficient

Wells Fargo  Catalyst/millburn

Poor diversification

The 3 months correlation between Wells and Catalyst/millburn is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Funds and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge 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 Funds are associated (or correlated) with Catalyst/millburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Wells Fargo i.e., Wells Fargo and Catalyst/millburn go up and down completely randomly.

Pair Corralation between Wells Fargo and Catalyst/millburn

Assuming the 90 days horizon Wells Fargo is expected to generate 6.85 times less return on investment than Catalyst/millburn. But when comparing it to its historical volatility, Wells Fargo Funds is 3.49 times less risky than Catalyst/millburn. It trades about 0.13 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,593  in Catalystmillburn Hedge Strategy on September 4, 2024 and sell it today you would earn a total of  251.00  from holding Catalystmillburn Hedge Strategy or generate 6.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Wells Fargo Funds  vs.  Catalystmillburn Hedge Strateg

Wells Fargo Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Funds are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Catalystmillburn Hedge

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Catalyst/millburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wells Fargo and Catalyst/millburn

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

The idea behind Wells Fargo Funds and Catalystmillburn Hedge Strategy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.