Correlation Between Wells Fargo and Cb Large

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

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

Diversification Opportunities for Wells Fargo and Cb Large

0.46

Correlation Coefficient

Wells Fargo  Cb Large

Very weak diversification

The 3 months correlation between Wells and CBLSX is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Cb Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cb Large Cap 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 Advantage are associated (or correlated) with Cb Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cb Large Cap has no effect on the direction of Wells Fargo i.e., Wells Fargo and Cb Large go up and down completely randomly.

Pair Corralation between Wells Fargo and Cb Large

Assuming the 90 days horizon Wells Fargo is expected to generate 1431.0 times less return on investment than Cb Large. But when comparing it to its historical volatility, Wells Fargo Advantage is 5.59 times less risky than Cb Large. It trades about 0.0 of its potential returns per unit of risk. Cb Large Cap is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,013  in Cb Large Cap on October 22, 2024 and sell it today you would earn a total of  26.00  from holding Cb Large Cap or generate 2.57% return on investment over 90 days.

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

Wells Fargo Advantage  vs.  Cb Large Cap

Wells Fargo Advantage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Advantage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong 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.

Cb Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cb Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Wells Fargo and Cb Large

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

The idea behind Wells Fargo Advantage and Cb Large Cap 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.