Correlation Between Wells Fargo and Calamos High

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

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

Diversification Opportunities for Wells Fargo and Calamos High

0.68

Correlation Coefficient

Wells Fargo  Calamos High

Poor diversification

The 3 months correlation between Wells and Calamos is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Diversified and Calamos High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calamos High Income 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 Diversified are associated (or correlated) with Calamos High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calamos High Income has no effect on the direction of Wells Fargo i.e., Wells Fargo and Calamos High go up and down completely randomly.

Pair Corralation between Wells Fargo and Calamos High

Assuming the 90 days horizon Wells Fargo Diversified is expected to generate 4.32 times more return on investment than Calamos High. However, Wells Fargo is 4.32 times more volatile than Calamos High Income. It trades about 0.07 of its potential returns per unit of risk. Calamos High Income is currently generating about 0.13 per unit of risk. If you would invest  1,026  in Wells Fargo Diversified on October 10, 2024 and sell it today you would earn a total of  368.00  from holding Wells Fargo Diversified or generate 35.87% return on investment over 90 days.

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

Wells Fargo Diversified  vs.  Calamos High Income

Wells Fargo Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Diversified 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.

Calamos High Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calamos High Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Calamos High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wells Fargo and Calamos High

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

The idea behind Wells Fargo Diversified and Calamos High Income 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.