Correlation Between Morguard and Wells Fargo

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

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

Diversification Opportunities for Morguard and Wells Fargo

0.84

Correlation Coefficient

Morguard  Wells Fargo

Very poor diversification

The 3 months correlation between Morguard and Wells is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morguard and Wall Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wall Financial and Morguard 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 Morguard 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 Wall Financial has no effect on the direction of Morguard i.e., Morguard and Wells Fargo go up and down completely randomly.

Pair Corralation between Morguard and Wells Fargo

Assuming the 90 days trading horizon Morguard is expected to generate 0.46 times more return on investment than Wells Fargo. However, Morguard is 2.18 times less risky than Wells Fargo. It trades about -0.04 of its potential returns per unit of risk. Wall Financial is currently generating about -0.19 per unit of risk. If you would invest  11,912  in Morguard on December 1, 2024 and sell it today you would lose (413.00) from holding Morguard or give up 3.47% of portfolio value over 90 days.

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

Morguard  vs.  Wall Financial

Morguard

Risk-Adjusted Performance

Very Weak

Over the last 90 days Morguard has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Morguard is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Wall Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wall Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Morguard and Wells Fargo

The main advantage of trading using opposite Morguard and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morguard 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 Morguard and Wall Financial 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.