Correlation Between Wells Fargo and Franklin Gold

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

By analyzing existing cross correlation between Wells Fargo Advantage and Franklin Gold Precious, you can compare the effects of market volatilities on Wells Fargo and Franklin Gold 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 Franklin Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Franklin Gold.

Diversification Opportunities for Wells Fargo and Franklin Gold

0.63

Correlation Coefficient

Wells Fargo  Franklin Gold

Poor diversification

The 3 months correlation between Wells and Franklin is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Franklin Gold Precious in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Gold Precious 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 Advantage are associated (or correlated) with Franklin Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Gold Precious has no effect on the direction of Wells Fargo i.e., Wells Fargo and Franklin Gold go up and down completely randomly.

Pair Corralation between Wells Fargo and Franklin Gold

Assuming the 90 days horizon Wells Fargo is expected to generate 10.64 times less return on investment than Franklin Gold. But when comparing it to its historical volatility, Wells Fargo Advantage is 3.82 times less risky than Franklin Gold. It trades about 0.12 of its potential returns per unit of risk. Franklin Gold Precious is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  1,505  in Franklin Gold Precious on December 21, 2024 and sell it today you would earn a total of  545.00  from holding Franklin Gold Precious or generate 36.21% return on investment over 90 days.

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

Wells Fargo Advantage  vs.  Franklin Gold Precious

Wells Fargo Advantage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Advantage 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.

Franklin Gold Precious

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Gold Precious are ranked lower than 26 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Gold showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wells Fargo and Franklin Gold

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

The idea behind Wells Fargo Advantage and Franklin Gold Precious 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.