Correlation Between Sitka Gold and Wells Fargo

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

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

Diversification Opportunities for Sitka Gold and Wells Fargo

0.47

Correlation Coefficient

Sitka Gold  Wells Fargo

Very weak diversification

The 3 months correlation between Sitka and Wells is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sitka Gold Corp 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 Sitka Gold 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 Sitka Gold Corp 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 Sitka Gold i.e., Sitka Gold and Wells Fargo go up and down completely randomly.

Pair Corralation between Sitka Gold and Wells Fargo

Assuming the 90 days horizon Sitka Gold Corp is expected to generate 4.21 times more return on investment than Wells Fargo. However, Sitka Gold is 4.21 times more volatile than Wells Fargo Opportunity. It trades about 0.33 of its potential returns per unit of risk. Wells Fargo Opportunity is currently generating about -0.32 per unit of risk. If you would invest  22.00  in Sitka Gold Corp on December 4, 2024 and sell it today you would earn a total of  5.00  from holding Sitka Gold Corp or generate 22.73% return on investment over 90 days.

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

Sitka Gold Corp  vs.  Wells Fargo Opportunity

Sitka Gold Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sitka Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Sitka Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Sitka Gold and Wells Fargo

The main advantage of trading using opposite Sitka Gold and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitka Gold 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 Sitka Gold Corp 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.

Check out your portfolio center.

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.