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 South 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
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sterling and Wells is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Capital South 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 South 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 1.63 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Sterling Capital South is 4.56 times less risky than Wells Fargo. It trades about 0.06 of its potential returns per unit of risk. Wells Fargo Large is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 661.00 in Wells Fargo Large on August 30, 2024 and sell it today you would earn a total of 45.00 from holding Wells Fargo Large or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Capital South vs. Wells Fargo Large
Performance |
| Timeline |
| Sterling Capital South |
| Wells Fargo Large |
Sterling Capital and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
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.| Sterling Capital vs. Virginia Bond Fund | Sterling Capital vs. HUMANA INC | Sterling Capital vs. Aquagold International | Sterling Capital vs. Barloworld Ltd ADR |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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