Correlation Between Wells Fargo and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Mid Cap 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 Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Diversified and Mid Cap 15x Strategy, you can compare the effects of market volatilities on Wells Fargo and Mid Cap 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 Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Mid Cap.
Diversification Opportunities for Wells Fargo and Mid Cap
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and Mid is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Diversified and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x 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 Diversified are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap 15x has no effect on the direction of Wells Fargo i.e., Wells Fargo and Mid Cap go up and down completely randomly.
Pair Corralation between Wells Fargo and Mid Cap
Assuming the 90 days horizon Wells Fargo Diversified is expected to generate 1.06 times more return on investment than Mid Cap. However, Wells Fargo is 1.06 times more volatile than Mid Cap 15x Strategy. It trades about -0.16 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about -0.26 per unit of risk. If you would invest 1,473 in Wells Fargo Diversified on October 12, 2024 and sell it today you would lose (77.00) from holding Wells Fargo Diversified or give up 5.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Diversified vs. Mid Cap 15x Strategy
Performance |
| Timeline |
| Wells Fargo Diversified |
| Mid Cap 15x |
Wells Fargo and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Mid Cap
The main advantage of trading using opposite Wells Fargo and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Wells Fargo vs. Wells Fargo Diversified | Wells Fargo vs. Wells Fargo Diversified | Wells Fargo vs. Wells Fargo Diversified | Wells Fargo vs. Boston Trust Asset |
| Mid Cap vs. Tiaa Cref Small Cap Equity | Mid Cap vs. Delaware Limited Term Diversified | Mid Cap vs. Fulcrum Diversified Absolute | Mid Cap vs. Wells Fargo Diversified |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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