Correlation Between Wells Fargo and Global Gold
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Global Gold 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 Global Gold 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 Global Gold Fund, you can compare the effects of market volatilities on Wells Fargo and Global Gold 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 Global Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Global Gold.
Diversification Opportunities for Wells Fargo and Global Gold
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between WELLS and Global is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Global Gold Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Gold Fund 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 Global Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Gold Fund has no effect on the direction of Wells Fargo i.e., Wells Fargo and Global Gold go up and down completely randomly.
Pair Corralation between Wells Fargo and Global Gold
Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 1.05 times more return on investment than Global Gold. However, Wells Fargo is 1.05 times more volatile than Global Gold Fund. It trades about -0.09 of its potential returns per unit of risk. Global Gold Fund is currently generating about -0.17 per unit of risk. If you would invest 5,658 in Wells Fargo Advantage on August 28, 2024 and sell it today you would lose (252.00) from holding Wells Fargo Advantage or give up 4.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Global Gold Fund
Performance |
| Timeline |
| Wells Fargo Advantage |
| Global Gold Fund |
Wells Fargo and Global Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Global Gold
The main advantage of trading using opposite Wells Fargo and Global Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Global Gold 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 Global Gold will offset losses from the drop in Global Gold'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 |
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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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