Correlation Between Wells Fargo and Vanguard Emerging
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Vanguard Emerging 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 Vanguard Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Emerging and Vanguard Emerging Markets, you can compare the effects of market volatilities on Wells Fargo and Vanguard Emerging 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 Vanguard Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Vanguard Emerging.
Diversification Opportunities for Wells Fargo and Vanguard Emerging
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wells and Vanguard is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Emerging and Vanguard Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Emerging Markets 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 Emerging are associated (or correlated) with Vanguard Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Emerging Markets has no effect on the direction of Wells Fargo i.e., Wells Fargo and Vanguard Emerging go up and down completely randomly.
Pair Corralation between Wells Fargo and Vanguard Emerging
Assuming the 90 days horizon Wells Fargo Emerging is expected to under-perform the Vanguard Emerging. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wells Fargo Emerging is 1.11 times less risky than Vanguard Emerging. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Vanguard Emerging Markets is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 3,855 in Vanguard Emerging Markets on September 1, 2024 and sell it today you would lose (84.00) from holding Vanguard Emerging Markets or give up 2.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wells Fargo Emerging vs. Vanguard Emerging Markets
Performance |
| Timeline |
| Wells Fargo Emerging |
| Vanguard Emerging Markets |
Wells Fargo and Vanguard Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Vanguard Emerging
The main advantage of trading using opposite Wells Fargo and Vanguard Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Vanguard Emerging 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 Vanguard Emerging will offset losses from the drop in Vanguard Emerging'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 |
| Vanguard Emerging vs. Vanguard Developed Markets | Vanguard Emerging vs. Vanguard Reit Index | Vanguard Emerging vs. Vanguard Small Cap Index | Vanguard Emerging vs. Vanguard European Stock |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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