Correlation Between Sterling Capital and Wells Fargo

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

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

Diversification Opportunities for Sterling Capital and Wells Fargo

0.91

Correlation Coefficient

Sterling Capital  Wells Fargo

Almost no diversification

The 3 months correlation between Sterling and Wells is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital Total and Wells Fargo Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Large and Sterling Capital 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 Sterling Capital Total 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 Large has no effect on the direction of Sterling Capital i.e., Sterling Capital and Wells Fargo go up and down completely randomly.

Pair Corralation between Sterling Capital and Wells Fargo

Assuming the 90 days horizon Sterling Capital is expected to generate 1.17 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Sterling Capital Total is 1.87 times less risky than Wells Fargo. It trades about 0.29 of its potential returns per unit of risk. Wells Fargo Large is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  678.00  in Wells Fargo Large on December 5, 2024 and sell it today you would earn a total of  17.00  from holding Wells Fargo Large or generate 2.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Sterling Capital Total  vs.  Wells Fargo Large

Sterling Capital Total

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sterling Capital Total are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Sterling Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wells Fargo Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and 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 Sterling Capital and Wells Fargo

The main advantage of trading using opposite Sterling Capital and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Capital 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 Sterling Capital Total and Wells Fargo Large 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.