Correlation Between Global Hard and Wells Fargo

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

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

Diversification Opportunities for Global Hard and Wells Fargo

0.62

Correlation Coefficient

Global Hard  Wells Fargo

Poor diversification

The 3 months correlation between GLOBAL and Wells is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Global Hard Assets and Wells Fargo Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Emerging and Global Hard 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 Global Hard Assets 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 Emerging has no effect on the direction of Global Hard i.e., Global Hard and Wells Fargo go up and down completely randomly.

Pair Corralation between Global Hard and Wells Fargo

Assuming the 90 days horizon Global Hard Assets is expected to generate 0.82 times more return on investment than Wells Fargo. However, Global Hard Assets is 1.21 times less risky than Wells Fargo. It trades about 0.14 of its potential returns per unit of risk. Wells Fargo Emerging is currently generating about 0.08 per unit of risk. If you would invest  3,615  in Global Hard Assets on December 29, 2024 and sell it today you would earn a total of  295.00  from holding Global Hard Assets or generate 8.16% return on investment over 90 days.

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

Global Hard Assets  vs.  Wells Fargo Emerging

Global Hard Assets

Risk-Adjusted Performance

Good

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

Wells Fargo Emerging

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Emerging are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic 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 Global Hard and Wells Fargo

The main advantage of trading using opposite Global Hard and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Hard 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 Global Hard Assets and Wells Fargo Emerging 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.