Correlation Between Wells Fargo and Small Pany

Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Small Pany 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 Small Pany 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 Small Pany Growth, you can compare the effects of market volatilities on Wells Fargo and Small Pany 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 Small Pany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Small Pany.

Diversification Opportunities for Wells Fargo and Small Pany

0.65

Correlation Coefficient

Wells Fargo  Small Pany

Poor diversification

The 3 months correlation between Wells and Small is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth 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 Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Wells Fargo i.e., Wells Fargo and Small Pany go up and down completely randomly.

Pair Corralation between Wells Fargo and Small Pany

Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 0.1 times more return on investment than Small Pany. However, Wells Fargo Advantage is 10.4 times less risky than Small Pany. It trades about -0.06 of its potential returns per unit of risk. Small Pany Growth is currently generating about -0.11 per unit of risk. If you would invest  965.00  in Wells Fargo Advantage on October 10, 2024 and sell it today you would lose (10.00) from holding Wells Fargo Advantage or give up 1.04% of portfolio value over 90 days.

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

Wells Fargo Advantage  vs.  Small Pany Growth

Wells Fargo Advantage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Advantage 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.

Small Pany Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Pany Growth 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Wells Fargo and Small Pany

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

The idea behind Wells Fargo Advantage and Small Pany Growth 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.