Correlation Between Companhia Paranaense and Wells Fargo

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

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

Diversification Opportunities for Companhia Paranaense and Wells Fargo

-0.28

Correlation Coefficient

Companhia Paranaense  Wells Fargo

Very good diversification

The 3 months correlation between Companhia and Wells is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de 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 Companhia Paranaense 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 Companhia Paranaense de 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 Companhia Paranaense i.e., Companhia Paranaense and Wells Fargo go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Wells Fargo

Considering the 90-day investment horizon Companhia Paranaense de is expected to under-perform the Wells Fargo. In addition to that, Companhia Paranaense is 2.34 times more volatile than Wells Fargo Advantage. It trades about -0.1 of its total potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.14 per unit of volatility. If you would invest  1,901  in Wells Fargo Advantage on September 2, 2024 and sell it today you would earn a total of  154.00  from holding Wells Fargo Advantage or generate 8.1% return on investment over 90 days.

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

Companhia Paranaense de  vs.  Wells Fargo Advantage

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Wells Fargo Advantage

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Advantage are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Wells Fargo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Companhia Paranaense and Wells Fargo

The main advantage of trading using opposite Companhia Paranaense and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Paranaense 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 Companhia Paranaense de 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.