Correlation Between American Funds and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both American Funds and Wells Fargo 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 American Funds and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds American and Wells Fargo Cb, you can compare the effects of market volatilities on American Funds and Wells Fargo 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 American Funds with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Wells Fargo.
Diversification Opportunities for American Funds and Wells Fargo
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Wells is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding American Funds American and Wells Fargo Cb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Cb and American Funds 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 American Funds American are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo Cb has no effect on the direction of American Funds i.e., American Funds and Wells Fargo go up and down completely randomly.
Pair Corralation between American Funds and Wells Fargo
Assuming the 90 days horizon American Funds American is expected to generate 0.99 times more return on investment than Wells Fargo. However, American Funds American is 1.01 times less risky than Wells Fargo. It trades about 0.33 of its potential returns per unit of risk. Wells Fargo Cb is currently generating about 0.32 per unit of risk. If you would invest 5,824 in American Funds American on September 4, 2024 and sell it today you would earn a total of 235.00 from holding American Funds American or generate 4.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
American Funds American vs. Wells Fargo Cb
Performance |
| Timeline |
| American Funds American |
| Wells Fargo Cb |
American Funds and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Wells Fargo
The main advantage of trading using opposite American Funds and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| American Funds vs. Pgim Conservative Retirement | American Funds vs. Adams Diversified Equity | American Funds vs. Prudential Core Conservative | American Funds vs. Aqr Diversified Arbitrage |
| Wells Fargo vs. Wells Fargo Strategic | Wells Fargo vs. Wells Fargo Emerging | Wells Fargo vs. Wells Fargo Alternative | Wells Fargo vs. Wells Fargo Alternative |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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