Correlation Between Barings Active and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Barings Active 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 Barings Active and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings Active Short and Wells Fargo Short, you can compare the effects of market volatilities on Barings Active 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 Barings Active with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Active and Wells Fargo.
Diversification Opportunities for Barings Active and Wells Fargo
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barings and Wells is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and Wells Fargo Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Short and Barings Active 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 Barings Active Short 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 Short has no effect on the direction of Barings Active i.e., Barings Active and Wells Fargo go up and down completely randomly.
Pair Corralation between Barings Active and Wells Fargo
Assuming the 90 days horizon Barings Active Short is expected to generate 0.99 times more return on investment than Wells Fargo. However, Barings Active Short is 1.01 times less risky than Wells Fargo. It trades about -0.04 of its potential returns per unit of risk. Wells Fargo Short is currently generating about -0.17 per unit of risk. If you would invest 926.00 in Barings Active Short on August 29, 2024 and sell it today you would lose (2.00) from holding Barings Active Short or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Barings Active Short vs. Wells Fargo Short
Performance |
| Timeline |
| Barings Active Short |
| Wells Fargo Short |
Barings Active and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Active and Wells Fargo
The main advantage of trading using opposite Barings Active and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Active 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.| Barings Active vs. Permanent Portfolio Class | Barings Active vs. HUMANA INC | Barings Active vs. Aquagold International | Barings Active vs. Barloworld Ltd ADR |
| Wells Fargo vs. Federated Short Intermediate Duration | Wells Fargo vs. Barings Active Short | Wells Fargo vs. Vanguard Emerging Markets | Wells Fargo vs. Versatile Bond Portfolio |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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