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 Inflation and Wells Fargo Small, 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
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Wells is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Inflation and Wells Fargo Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Small 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 Inflation 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 Small 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 is expected to generate 4.64 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, American Funds Inflation is 4.25 times less risky than Wells Fargo. It trades about 0.05 of its potential returns per unit of risk. Wells Fargo Small is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,688 in Wells Fargo Small on September 14, 2024 and sell it today you would earn a total of 629.00 from holding Wells Fargo Small or generate 17.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Inflation vs. Wells Fargo Small
Performance |
| Timeline |
| American Funds Inflation |
| Wells Fargo Small |
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. Putnam Convertible Incm Gwth | American Funds vs. Virtus Convertible | American Funds vs. Advent Claymore Convertible | American Funds vs. Rationalpier 88 Convertible |
| Wells Fargo vs. Virtus Convertible | Wells Fargo vs. Fidelity Sai Convertible | Wells Fargo vs. Advent Claymore Convertible | Wells Fargo vs. Rationalpier 88 Convertible |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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