Correlation Between Wells Fargo and Inflation Protected
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Inflation Protected 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 Inflation Protected 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 Inflation Protected Bond Fund, you can compare the effects of market volatilities on Wells Fargo and Inflation Protected 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 Inflation Protected. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Inflation Protected.
Diversification Opportunities for Wells Fargo and Inflation Protected
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wells and Inflation is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Inflation Protected Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protected 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 Inflation Protected. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protected has no effect on the direction of Wells Fargo i.e., Wells Fargo and Inflation Protected go up and down completely randomly.
Pair Corralation between Wells Fargo and Inflation Protected
Assuming the 90 days horizon Wells Fargo is expected to generate 1.45 times less return on investment than Inflation Protected. But when comparing it to its historical volatility, Wells Fargo Advantage is 3.52 times less risky than Inflation Protected. It trades about 0.36 of its potential returns per unit of risk. Inflation Protected Bond Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,024 in Inflation Protected Bond Fund on September 12, 2024 and sell it today you would earn a total of 10.00 from holding Inflation Protected Bond Fund or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Inflation Protected Bond Fund
Performance |
| Timeline |
| Wells Fargo Advantage |
| Inflation Protected |
Wells Fargo and Inflation Protected Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Inflation Protected
The main advantage of trading using opposite Wells Fargo and Inflation Protected positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Inflation Protected 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 Inflation Protected will offset losses from the drop in Inflation Protected's long position.| Wells Fargo vs. Vanguard Limited Term Tax Exempt | Wells Fargo vs. Vanguard Limited Term Tax Exempt | Wells Fargo vs. Vanguard Short Term Tax Exempt | Wells Fargo vs. Vanguard Short Term Tax Exempt |
| Inflation Protected vs. Aqr Large Cap | Inflation Protected vs. Pace Large Growth | Inflation Protected vs. Old Westbury Large | Inflation Protected vs. Rational Strategic Allocation |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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