Correlation Between Gold Bullion and Wells Fargo

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

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

Diversification Opportunities for Gold Bullion and Wells Fargo

-0.36

Correlation Coefficient

Gold Bullion  Wells Fargo

Very good diversification

The 3 months correlation between Gold and Wells is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding The Gold Bullion and Wells Fargo Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Opportunity and Gold Bullion 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 The Gold Bullion 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 Opportunity has no effect on the direction of Gold Bullion i.e., Gold Bullion and Wells Fargo go up and down completely randomly.

Pair Corralation between Gold Bullion and Wells Fargo

Assuming the 90 days horizon The Gold Bullion is expected to generate 0.9 times more return on investment than Wells Fargo. However, The Gold Bullion is 1.11 times less risky than Wells Fargo. It trades about 0.29 of its potential returns per unit of risk. Wells Fargo Opportunity is currently generating about -0.1 per unit of risk. If you would invest  1,967  in The Gold Bullion on December 19, 2024 and sell it today you would earn a total of  318.00  from holding The Gold Bullion or generate 16.17% return on investment over 90 days.

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

The Gold Bullion  vs.  Wells Fargo Opportunity

Gold Bullion

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Gold Bullion are ranked lower than 22 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Gold Bullion showed solid returns over the last few months and may actually be approaching a breakup point.

Wells Fargo Opportunity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Gold Bullion and Wells Fargo

The main advantage of trading using opposite Gold Bullion and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Bullion 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 The Gold Bullion and Wells Fargo Opportunity 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.