Correlation Between Artisan Small and Wells Fargo

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

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

Diversification Opportunities for Artisan Small and Wells Fargo

0.84

Correlation Coefficient

Artisan Small  Wells Fargo

Very poor diversification

The 3 months correlation between Artisan and Wells is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Small Cap and Wells Fargo Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Large and Artisan Small 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 Artisan Small 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 Large has no effect on the direction of Artisan Small i.e., Artisan Small and Wells Fargo go up and down completely randomly.

Pair Corralation between Artisan Small and Wells Fargo

Assuming the 90 days horizon Artisan Small Cap is expected to generate 1.06 times more return on investment than Wells Fargo. However, Artisan Small is 1.06 times more volatile than Wells Fargo Large. It trades about -0.08 of its potential returns per unit of risk. Wells Fargo Large is currently generating about -0.09 per unit of risk. If you would invest  3,576  in Artisan Small Cap on December 20, 2024 and sell it today you would lose (263.00) from holding Artisan Small Cap or give up 7.35% of portfolio value over 90 days.

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

Artisan Small Cap  vs.  Wells Fargo Large

Artisan Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artisan Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Wells Fargo Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Artisan Small and Wells Fargo

The main advantage of trading using opposite Artisan Small and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Small 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 Artisan Small Cap and Wells Fargo Large 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.

Check out your portfolio center.

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.