Correlation Between Great West and Wells Fargo

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

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

Diversification Opportunities for Great West and Wells Fargo

0.98

Correlation Coefficient

Great West  Wells Fargo

Almost no diversification

The 3 months correlation between Great and Wells is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Great West Goldman Sachs 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 Great West 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 Great West Goldman Sachs 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 Great West i.e., Great West and Wells Fargo go up and down completely randomly.

Pair Corralation between Great West and Wells Fargo

Assuming the 90 days horizon Great West Goldman Sachs is expected to generate 0.52 times more return on investment than Wells Fargo. However, Great West Goldman Sachs is 1.91 times less risky than Wells Fargo. It trades about 0.06 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.01 per unit of risk. If you would invest  965.00  in Great West Goldman Sachs on September 21, 2024 and sell it today you would earn a total of  19.00  from holding Great West Goldman Sachs or generate 1.97% return on investment over 90 days.

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

Great West Goldman Sachs  vs.  Wells Fargo Advantage

Great West Goldman

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Great West Goldman Sachs are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Great West is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Advantage

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Advantage are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Great West and Wells Fargo

The main advantage of trading using opposite Great West and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great West 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 Great West Goldman Sachs 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.