Correlation Between Quantitative and Wells Fargo

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

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

Diversification Opportunities for Quantitative and Wells Fargo

0.89

Correlation Coefficient

Quantitative  Wells Fargo

Very poor diversification

The 3 months correlation between Quantitative and Wells is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity 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 Quantitative 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 Quantitative Longshort Equity 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 Quantitative i.e., Quantitative and Wells Fargo go up and down completely randomly.

Pair Corralation between Quantitative and Wells Fargo

Assuming the 90 days horizon Quantitative Longshort Equity is expected to generate 0.79 times more return on investment than Wells Fargo. However, Quantitative Longshort Equity is 1.27 times less risky than Wells Fargo. It trades about -0.13 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about -0.22 per unit of risk. If you would invest  1,484  in Quantitative Longshort Equity on December 11, 2024 and sell it today you would lose (136.00) from holding Quantitative Longshort Equity or give up 9.16% of portfolio value over 90 days.

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

Quantitative Longshort Equity  vs.  Wells Fargo Advantage

Quantitative Longshort

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quantitative Longshort Equity 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 Advantage

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo Advantage has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Quantitative and Wells Fargo

The main advantage of trading using opposite Quantitative and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative 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 Quantitative Longshort Equity 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.