Correlation Between Wells Fargo and Specialized Technology

Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Specialized Technology 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 Specialized Technology 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 Specialized Technology Fund, you can compare the effects of market volatilities on Wells Fargo and Specialized Technology 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 Specialized Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Specialized Technology.

Diversification Opportunities for Wells Fargo and Specialized Technology

0.54

Correlation Coefficient

Wells Fargo  Specialized Technology

Very weak diversification

The 3 months correlation between Wells and SPECIALIZED is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Specialized Technology Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Specialized Technology 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 Specialized Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Specialized Technology has no effect on the direction of Wells Fargo i.e., Wells Fargo and Specialized Technology go up and down completely randomly.

Pair Corralation between Wells Fargo and Specialized Technology

Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 0.11 times more return on investment than Specialized Technology. However, Wells Fargo Advantage is 9.39 times less risky than Specialized Technology. It trades about 0.2 of its potential returns per unit of risk. Specialized Technology Fund is currently generating about -0.29 per unit of risk. If you would invest  886.00  in Wells Fargo Advantage on December 4, 2024 and sell it today you would earn a total of  4.00  from holding Wells Fargo Advantage or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Wells Fargo Advantage  vs.  Specialized Technology Fund

Wells Fargo Advantage

Risk-Adjusted Performance

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.

Specialized Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Specialized Technology Fund 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Wells Fargo and Specialized Technology

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

The idea behind Wells Fargo Advantage and Specialized Technology Fund 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 Commodity Directory module to find actively traded commodities issued by global exchanges.