Correlation Between Old Westbury and Wells Fargo

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

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

Diversification Opportunities for Old Westbury and Wells Fargo

0.83

Correlation Coefficient

Old Westbury  Wells Fargo

Very poor diversification

The 3 months correlation between Old and Wells is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Short Term and Wells Fargo Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Ultra and Old Westbury 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 Old Westbury Short Term 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 Ultra has no effect on the direction of Old Westbury i.e., Old Westbury and Wells Fargo go up and down completely randomly.

Pair Corralation between Old Westbury and Wells Fargo

Assuming the 90 days horizon Old Westbury is expected to generate 2.1 times less return on investment than Wells Fargo. In addition to that, Old Westbury is 1.09 times more volatile than Wells Fargo Ultra. It trades about 0.1 of its total potential returns per unit of risk. Wells Fargo Ultra is currently generating about 0.23 per unit of volatility. If you would invest  871.00  in Wells Fargo Ultra on October 23, 2024 and sell it today you would earn a total of  11.00  from holding Wells Fargo Ultra or generate 1.26% return on investment over 90 days.

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

Old Westbury Short Term  vs.  Wells Fargo Ultra

Old Westbury Short

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Short Term are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Ultra

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Ultra are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. 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 Old Westbury and Wells Fargo

The main advantage of trading using opposite Old Westbury and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury 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 Old Westbury Short Term and Wells Fargo Ultra 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.