Correlation Between Wells Fargo and Fuller Thaler

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

Diversification Opportunities for Wells Fargo and Fuller Thaler

0.28

Correlation Coefficient

Wells Fargo  Fuller Thaler

Modest diversification

The 3 months correlation between Wells and Fuller is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Diversified and Fuller Thaler Behavioral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuller Thaler Behavioral 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 Fuller Thaler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuller Thaler Behavioral has no effect on the direction of Wells Fargo i.e., Wells Fargo and Fuller Thaler go up and down completely randomly.

Pair Corralation between Wells Fargo and Fuller Thaler

Assuming the 90 days horizon Wells Fargo Diversified is expected to under-perform the Fuller Thaler. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wells Fargo Diversified is 1.13 times less risky than Fuller Thaler. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Fuller Thaler Behavioral is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,799  in Fuller Thaler Behavioral on October 10, 2024 and sell it today you would lose (85.00) from holding Fuller Thaler Behavioral or give up 3.04% of portfolio value over 90 days.

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

Wells Fargo Diversified  vs.  Fuller Thaler Behavioral

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.

Fuller Thaler Behavioral

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuller Thaler Behavioral are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fuller Thaler showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wells Fargo and Fuller Thaler

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

The idea behind Wells Fargo Diversified and Fuller Thaler Behavioral 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.