Correlation Between Guidemark Smallmid and Wells Fargo

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

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

Diversification Opportunities for Guidemark Smallmid and Wells Fargo

0.79

Correlation Coefficient

Guidemark Smallmid  Wells Fargo

Poor diversification

The 3 months correlation between Guidemark and Wells is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Guidemark Smallmid Cap and Wells Fargo Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Diversified and Guidemark Smallmid 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 Guidemark Smallmid 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 Diversified has no effect on the direction of Guidemark Smallmid i.e., Guidemark Smallmid and Wells Fargo go up and down completely randomly.

Pair Corralation between Guidemark Smallmid and Wells Fargo

Assuming the 90 days horizon Guidemark Smallmid Cap is expected to under-perform the Wells Fargo. In addition to that, Guidemark Smallmid is 1.37 times more volatile than Wells Fargo Diversified. It trades about -0.04 of its total potential returns per unit of risk. Wells Fargo Diversified is currently generating about -0.01 per unit of volatility. If you would invest  1,419  in Wells Fargo Diversified on October 8, 2024 and sell it today you would lose (14.00) from holding Wells Fargo Diversified or give up 0.99% of portfolio value over 90 days.

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

Guidemark Smallmid Cap  vs.  Wells Fargo Diversified

Guidemark Smallmid Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Guidemark Smallmid and Wells Fargo

The main advantage of trading using opposite Guidemark Smallmid and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guidemark Smallmid 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 Guidemark Smallmid Cap and Wells Fargo Diversified 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.