Correlation Between Lsv Value and Wells Fargo

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

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

Diversification Opportunities for Lsv Value and Wells Fargo

0.92

Correlation Coefficient

Lsv Value  Wells Fargo

Almost no diversification

The 3 months correlation between Lsv and Wells is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Lsv Value Equity 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 Lsv Value 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 Lsv Value 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 Discovery has no effect on the direction of Lsv Value i.e., Lsv Value and Wells Fargo go up and down completely randomly.

Pair Corralation between Lsv Value and Wells Fargo

Assuming the 90 days horizon Lsv Value Equity is expected to generate 0.7 times more return on investment than Wells Fargo. However, Lsv Value Equity is 1.42 times less risky than Wells Fargo. It trades about -0.19 of its potential returns per unit of risk. Wells Fargo Discovery is currently generating about -0.14 per unit of risk. If you would invest  2,997  in Lsv Value Equity on October 26, 2024 and sell it today you would lose (261.00) from holding Lsv Value Equity or give up 8.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.5%
Values	Daily Returns

Lsv Value Equity  vs.  Wells Fargo Discovery

Lsv Value Equity

Risk-Adjusted Performance

0 of 100

Very Weak

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

Wells Fargo Discovery

Risk-Adjusted Performance

0 of 100

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 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 Lsv Value and Wells Fargo

The main advantage of trading using opposite Lsv Value and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lsv Value 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 Lsv Value Equity 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.