Correlation Between Boston Trust and Wells Fargo

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

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

Diversification Opportunities for Boston Trust and Wells Fargo

-0.09

Correlation Coefficient

Boston Trust  Wells Fargo

Good diversification

The 3 months correlation between Boston and Wells is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Boston Trust Asset 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 Boston Trust 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 Boston Trust Asset 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 Boston Trust i.e., Boston Trust and Wells Fargo go up and down completely randomly.

Pair Corralation between Boston Trust and Wells Fargo

Assuming the 90 days horizon Boston Trust Asset is expected to under-perform the Wells Fargo. But the mutual fund apears to be less risky and, when comparing its historical volatility, Boston Trust Asset is 2.83 times less risky than Wells Fargo. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Wells Fargo Advantage is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  5,694  in Wells Fargo Advantage on December 20, 2024 and sell it today you would earn a total of  1,722  from holding Wells Fargo Advantage or generate 30.24% return on investment over 90 days.

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

Boston Trust Asset  vs.  Wells Fargo Advantage

Boston Trust Asset

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Trust Asset has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Boston Trust 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

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Advantage are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wells Fargo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Trust and Wells Fargo

The main advantage of trading using opposite Boston Trust and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Trust 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 Boston Trust Asset 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.