Correlation Between Delaware Healthcare and Wells Fargo

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

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

Diversification Opportunities for Delaware Healthcare and Wells Fargo

0.42

Correlation Coefficient

Delaware Healthcare  Wells Fargo

Very weak diversification

The 3 months correlation between Delaware and WELLS is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Delaware Healthcare Fund 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 Delaware Healthcare 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 Delaware Healthcare Fund 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 Delaware Healthcare i.e., Delaware Healthcare and Wells Fargo go up and down completely randomly.

Pair Corralation between Delaware Healthcare and Wells Fargo

Assuming the 90 days horizon Delaware Healthcare is expected to generate 35.5 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Delaware Healthcare Fund is 1.72 times less risky than Wells Fargo. It trades about 0.0 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,975  in Wells Fargo Advantage on October 26, 2024 and sell it today you would earn a total of  1,464  from holding Wells Fargo Advantage or generate 36.83% return on investment over 90 days.

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

Delaware Healthcare Fund  vs.  Wells Fargo Advantage

Delaware Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delaware Healthcare 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 technical 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.

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delaware Healthcare and Wells Fargo

The main advantage of trading using opposite Delaware Healthcare and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delaware Healthcare 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 Delaware Healthcare Fund 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.