Correlation Between Wells Fargo and Allspring Fundamental

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

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

Diversification Opportunities for Wells Fargo and Allspring Fundamental

0.81

Correlation Coefficient

Wells Fargo  Allspring Fundamental

Very poor diversification

The 3 months correlation between Wells and Allspring is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Ultra and Allspring Fundamental Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allspring Fundamental and Wells Fargo 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 Wells Fargo Ultra are associated (or correlated) with Allspring Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allspring Fundamental has no effect on the direction of Wells Fargo i.e., Wells Fargo and Allspring Fundamental go up and down completely randomly.

Pair Corralation between Wells Fargo and Allspring Fundamental

Assuming the 90 days horizon Wells Fargo is expected to generate 3.16 times less return on investment than Allspring Fundamental. But when comparing it to its historical volatility, Wells Fargo Ultra is 12.45 times less risky than Allspring Fundamental. It trades about 0.25 of its potential returns per unit of risk. Allspring Fundamental Small is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,567  in Allspring Fundamental Small on September 20, 2024 and sell it today you would earn a total of  285.00  from holding Allspring Fundamental Small or generate 18.19% return on investment over 90 days.

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

Wells Fargo Ultra  vs.  Allspring Fundamental Small

Wells Fargo Ultra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Ultra are ranked lower than 9 (%) 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.

Allspring Fundamental

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allspring Fundamental Small are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Allspring Fundamental is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wells Fargo and Allspring Fundamental

The main advantage of trading using opposite Wells Fargo and Allspring Fundamental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Allspring Fundamental 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 Allspring Fundamental will offset losses from the drop in Allspring Fundamental's long position.

The idea behind Wells Fargo Ultra and Allspring Fundamental Small 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.