Correlation Between Aqr Diversified and Wells Fargo

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

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

Diversification Opportunities for Aqr Diversified and Wells Fargo

0.06

Correlation Coefficient

Aqr Diversified  Wells Fargo

Significant diversification

The 3 months correlation between Aqr and Wells is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Diversified Arbitrage 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 Aqr Diversified 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 Aqr Diversified Arbitrage 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 Aqr Diversified i.e., Aqr Diversified and Wells Fargo go up and down completely randomly.

Pair Corralation between Aqr Diversified and Wells Fargo

Assuming the 90 days horizon Aqr Diversified is expected to generate 5.38 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Aqr Diversified Arbitrage is 2.82 times less risky than Wells Fargo. It trades about 0.05 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,105  in Wells Fargo Advantage on September 27, 2024 and sell it today you would earn a total of  76.00  from holding Wells Fargo Advantage or generate 6.88% return on investment over 90 days.

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

Aqr Diversified Arbitrage  vs.  Wells Fargo Advantage

Aqr Diversified Arbitrage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aqr Diversified Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Aqr Diversified 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

0 of 100

Very Weak

Over the last 90 days Wells Fargo Advantage has generated negative risk-adjusted returns adding no value to fund investors. 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 Aqr Diversified and Wells Fargo

The main advantage of trading using opposite Aqr Diversified and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Diversified 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 Aqr Diversified Arbitrage 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.