Correlation Between Valic Company and Wells Fargo

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

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

Diversification Opportunities for Valic Company and Wells Fargo

0.9

Correlation Coefficient

Valic Company  Wells Fargo

Almost no diversification

The 3 months correlation between Valic and Wells is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Valic Company I and Wells Fargo Mon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Mon and Valic Company 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 Valic Company I 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 Mon has no effect on the direction of Valic Company i.e., Valic Company and Wells Fargo go up and down completely randomly.

Pair Corralation between Valic Company and Wells Fargo

Assuming the 90 days horizon Valic Company I is expected to generate 1.04 times more return on investment than Wells Fargo. However, Valic Company is 1.04 times more volatile than Wells Fargo Mon. It trades about 0.05 of its potential returns per unit of risk. Wells Fargo Mon is currently generating about -0.02 per unit of risk. If you would invest  1,279  in Valic Company I on October 24, 2024 and sell it today you would earn a total of  52.00  from holding Valic Company I or generate 4.07% return on investment over 90 days.

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

Valic Company I  vs.  Wells Fargo Mon

Valic Company I

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valic Company I are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Valic Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wells Fargo Mon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Mon has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong 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 Valic Company and Wells Fargo

The main advantage of trading using opposite Valic Company and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valic Company 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 Valic Company I and Wells Fargo Mon 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.