Correlation Between Wells Fargo and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Stone Ridge 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 Stone Ridge 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 Stone Ridge Diversified, you can compare the effects of market volatilities on Wells Fargo and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Stone Ridge.
Diversification Opportunities for Wells Fargo and Stone Ridge
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wells and Stone is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Diversified and Stone Ridge Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge Diversified 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge Diversified has no effect on the direction of Wells Fargo i.e., Wells Fargo and Stone Ridge go up and down completely randomly.
Pair Corralation between Wells Fargo and Stone Ridge
Assuming the 90 days horizon Wells Fargo Diversified is expected to generate 9.17 times more return on investment than Stone Ridge. However, Wells Fargo is 9.17 times more volatile than Stone Ridge Diversified. It trades about 0.09 of its potential returns per unit of risk. Stone Ridge Diversified is currently generating about -0.11 per unit of risk. If you would invest 1,371 in Wells Fargo Diversified on November 3, 2024 and sell it today you would earn a total of 37.00 from holding Wells Fargo Diversified or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Diversified vs. Stone Ridge Diversified
Performance |
| Timeline |
| Wells Fargo Diversified |
| Stone Ridge Diversified |
Wells Fargo and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Stone Ridge
The main advantage of trading using opposite Wells Fargo and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge'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 |
| Stone Ridge vs. Artisan High Income | Stone Ridge vs. Multisector Bond Sma | Stone Ridge vs. Angel Oak Financial | Stone Ridge vs. Ab Bond Inflation |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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