Correlation Between Mfs International and Wells Fargo

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

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

Diversification Opportunities for Mfs International and Wells Fargo

0.92

Correlation Coefficient

Mfs International  Wells Fargo

Almost no diversification

The 3 months correlation between Mfs and Wells is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Value 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 Mfs International 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 Mfs International Value 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 Mfs International i.e., Mfs International and Wells Fargo go up and down completely randomly.

Pair Corralation between Mfs International and Wells Fargo

Assuming the 90 days horizon Mfs International Value is expected to generate 0.82 times more return on investment than Wells Fargo. However, Mfs International Value is 1.23 times less risky than Wells Fargo. It trades about 0.17 of its potential returns per unit of risk. Wells Fargo Emerging is currently generating about 0.09 per unit of risk. If you would invest  3,584  in Mfs International Value on December 27, 2024 and sell it today you would earn a total of  345.00  from holding Mfs International Value or generate 9.63% return on investment over 90 days.

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

Mfs International Value  vs.  Wells Fargo Emerging

Mfs International Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs International Value are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mfs International may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Wells Fargo Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Emerging are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wells Fargo may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mfs International and Wells Fargo

The main advantage of trading using opposite Mfs International and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs International 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 Mfs International Value 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.