Correlation Between Wells Fargo and Absolute Capital
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Absolute Capital 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 Absolute Capital 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 Absolute Capital Defender, you can compare the effects of market volatilities on Wells Fargo and Absolute Capital 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 Absolute Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Absolute Capital.
Diversification Opportunities for Wells Fargo and Absolute Capital
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between WELLS and Absolute is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Absolute Capital Defender in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Capital Defender 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 Absolute Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Capital Defender has no effect on the direction of Wells Fargo i.e., Wells Fargo and Absolute Capital go up and down completely randomly.
Pair Corralation between Wells Fargo and Absolute Capital
Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 4.01 times more return on investment than Absolute Capital. However, Wells Fargo is 4.01 times more volatile than Absolute Capital Defender. It trades about 0.07 of its potential returns per unit of risk. Absolute Capital Defender is currently generating about 0.14 per unit of risk. If you would invest 4,096 in Wells Fargo Advantage on August 26, 2024 and sell it today you would earn a total of 1,310 from holding Wells Fargo Advantage or generate 31.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Absolute Capital Defender
Performance |
| Timeline |
| Wells Fargo Advantage |
| Absolute Capital Defender |
Wells Fargo and Absolute Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Absolute Capital
The main advantage of trading using opposite Wells Fargo and Absolute Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Absolute Capital 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 Absolute Capital will offset losses from the drop in Absolute Capital's long position.| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Ultra |
| Absolute Capital vs. International Investors Gold | Absolute Capital vs. Wells Fargo Advantage | Absolute Capital vs. James Balanced Golden | Absolute Capital vs. Gold And Precious |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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