Correlation Between Iaadx and Wells Fargo

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

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

Diversification Opportunities for Iaadx and Wells Fargo

0.3

Correlation Coefficient

Iaadx  Wells Fargo

Weak diversification

The 3 months correlation between Iaadx and Wells is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Iaadx 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 Iaadx 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 Iaadx 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 Iaadx i.e., Iaadx and Wells Fargo go up and down completely randomly.

Pair Corralation between Iaadx and Wells Fargo

Assuming the 90 days horizon Iaadx is expected to generate 0.2 times more return on investment than Wells Fargo. However, Iaadx is 4.96 times less risky than Wells Fargo. It trades about 0.09 of its potential returns per unit of risk. Wells Fargo Mon is currently generating about -0.25 per unit of risk. If you would invest  911.00  in Iaadx on December 4, 2024 and sell it today you would earn a total of  12.00  from holding Iaadx or generate 1.32% return on investment over 90 days.

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

Iaadx  vs.  Wells Fargo Mon

Iaadx

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Iaadx are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Iaadx 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

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 weak performance in the last few months, the Fund's fundamental 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 Iaadx and Wells Fargo

The main advantage of trading using opposite Iaadx and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iaadx 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 Iaadx 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.