Correlation Between Aqr Sustainable and Wells Fargo

Can any of the company-specific risk be diversified away by investing in both Aqr Sustainable 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 Sustainable 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 Sustainable Long Short and Wells Fargo International, you can compare the effects of market volatilities on Aqr Sustainable 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 Sustainable with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aqr Sustainable and Wells Fargo.

Diversification Opportunities for Aqr Sustainable and Wells Fargo

0.64

Correlation Coefficient

Aqr Sustainable  Wells Fargo

Poor diversification

The 3 months correlation between Aqr and Wells is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aqr Sustainable Long Short and Wells Fargo International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo International and Aqr Sustainable 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 Sustainable Long Short 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 International has no effect on the direction of Aqr Sustainable i.e., Aqr Sustainable and Wells Fargo go up and down completely randomly.

Pair Corralation between Aqr Sustainable and Wells Fargo

Assuming the 90 days horizon Aqr Sustainable is expected to generate 8.37 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Aqr Sustainable Long Short is 1.0 times less risky than Wells Fargo. It trades about 0.04 of its potential returns per unit of risk. Wells Fargo International is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,218  in Wells Fargo International on December 18, 2024 and sell it today you would earn a total of  192.00  from holding Wells Fargo International or generate 15.76% return on investment over 90 days.

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

Aqr Sustainable Long Short  vs.  Wells Fargo International

Aqr Sustainable Long

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Sustainable Long Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Aqr Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo International are ranked lower than 23 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Wells Fargo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aqr Sustainable and Wells Fargo

The main advantage of trading using opposite Aqr Sustainable and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aqr Sustainable 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 Sustainable Long Short and Wells Fargo International 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.