Correlation Between Fidelity Series and Wells Fargo

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

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

Diversification Opportunities for Fidelity Series and Wells Fargo

0.49

Correlation Coefficient

Fidelity Series  Wells Fargo

Very weak diversification

The 3 months correlation between Fidelity and Wells is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Series Government and Wells Fargo Mon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Mon and Fidelity Series 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 Fidelity Series Government 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 Mon has no effect on the direction of Fidelity Series i.e., Fidelity Series and Wells Fargo go up and down completely randomly.

Pair Corralation between Fidelity Series and Wells Fargo

Assuming the 90 days horizon Fidelity Series is expected to generate 1.89 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Fidelity Series Government is 2.98 times less risky than Wells Fargo. It trades about 0.03 of its potential returns per unit of risk. Wells Fargo Mon is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,784  in Wells Fargo Mon on October 22, 2024 and sell it today you would earn a total of  118.00  from holding Wells Fargo Mon or generate 6.61% return on investment over 90 days.

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

Fidelity Series Government  vs.  Wells Fargo Mon

Fidelity Series Gove

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wells Fargo Mon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Mon 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.

Pair Trading with Fidelity Series and Wells Fargo

The main advantage of trading using opposite Fidelity Series and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Series 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 Fidelity Series Government and Wells Fargo Mon 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.