Correlation Between Applied Finance and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Applied Finance 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 Applied Finance and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Wells Fargo Intermediate, you can compare the effects of market volatilities on Applied Finance 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 Applied Finance with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Wells Fargo.
Diversification Opportunities for Applied Finance and Wells Fargo
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Wells is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Wells Fargo Intermediate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Intermediate and Applied Finance 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 Applied Finance Explorer 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 Intermediate has no effect on the direction of Applied Finance i.e., Applied Finance and Wells Fargo go up and down completely randomly.
Pair Corralation between Applied Finance and Wells Fargo
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 6.44 times more return on investment than Wells Fargo. However, Applied Finance is 6.44 times more volatile than Wells Fargo Intermediate. It trades about 0.26 of its potential returns per unit of risk. Wells Fargo Intermediate is currently generating about 0.18 per unit of risk. If you would invest 2,247 in Applied Finance Explorer on September 1, 2024 and sell it today you would earn a total of 181.00 from holding Applied Finance Explorer or generate 8.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Applied Finance Explorer vs. Wells Fargo Intermediate
Performance |
| Timeline |
| Applied Finance Explorer |
| Wells Fargo Intermediate |
Applied Finance and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Wells Fargo
The main advantage of trading using opposite Applied Finance and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
| Wells Fargo vs. Wells Fargo Strategic | Wells Fargo vs. Wells Fargo Emerging | Wells Fargo vs. Wells Fargo Alternative | Wells Fargo vs. Wells Fargo Alternative |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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