Correlation Between Wells Fargo and International Investors
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and International Investors 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 International Investors 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 International Investors Gold, you can compare the effects of market volatilities on Wells Fargo and International Investors 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 International Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and International Investors.
Diversification Opportunities for Wells Fargo and International Investors
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Wells and International is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and International Investors Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Investors 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 International Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Investors has no effect on the direction of Wells Fargo i.e., Wells Fargo and International Investors go up and down completely randomly.
Pair Corralation between Wells Fargo and International Investors
Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 1.07 times more return on investment than International Investors. However, Wells Fargo is 1.07 times more volatile than International Investors Gold. It trades about -0.13 of its potential returns per unit of risk. International Investors Gold is currently generating about -0.2 per unit of risk. If you would invest 6,714 in Wells Fargo Advantage on August 25, 2024 and sell it today you would lose (424.00) from holding Wells Fargo Advantage or give up 6.32% 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. International Investors Gold
Performance |
| Timeline |
| Wells Fargo Advantage |
| International Investors |
Wells Fargo and International Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and International Investors
The main advantage of trading using opposite Wells Fargo and International Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, International Investors 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 International Investors will offset losses from the drop in International Investors' long position.| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Ocm Mutual Fund | Wells Fargo vs. Precious Metals Fund |
| International Investors vs. Ab Value Fund | International Investors vs. Multimedia Portfolio Multimedia | International Investors vs. Qs Large Cap | International Investors vs. Rational Special Situations |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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