Correlation Between Nuveen Small and Wells Fargo

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

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

Diversification Opportunities for Nuveen Small and Wells Fargo

0.92

Correlation Coefficient

Nuveen Small  Wells Fargo

Almost no diversification

The 3 months correlation between Nuveen and Wells is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Nuveen Small Cap and Wells Fargo Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Discovery and Nuveen Small 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 Nuveen Small Cap 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 Discovery has no effect on the direction of Nuveen Small i.e., Nuveen Small and Wells Fargo go up and down completely randomly.

Pair Corralation between Nuveen Small and Wells Fargo

Assuming the 90 days horizon Nuveen Small Cap is expected to under-perform the Wells Fargo. But the mutual fund apears to be less risky and, when comparing its historical volatility, Nuveen Small Cap is 1.04 times less risky than Wells Fargo. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Wells Fargo Discovery is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  3,157  in Wells Fargo Discovery on December 20, 2024 and sell it today you would lose (290.00) from holding Wells Fargo Discovery or give up 9.19% of portfolio value over 90 days.

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

Nuveen Small Cap  vs.  Wells Fargo Discovery

Nuveen Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuveen Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Wells Fargo Discovery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Nuveen Small and Wells Fargo

The main advantage of trading using opposite Nuveen Small and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuveen Small 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 Nuveen Small Cap and Wells Fargo Discovery 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.