Correlation Between Federated Emerging and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Federated Emerging 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 Federated Emerging and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federated Emerging Market and Wells Fargo Mon, you can compare the effects of market volatilities on Federated Emerging 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 Federated Emerging with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federated Emerging and Wells Fargo.
Diversification Opportunities for Federated Emerging and Wells Fargo
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Federated and Wells is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Federated Emerging Market and Wells Fargo Mon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Mon and Federated Emerging 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 Federated Emerging Market 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 Mon has no effect on the direction of Federated Emerging i.e., Federated Emerging and Wells Fargo go up and down completely randomly.
Pair Corralation between Federated Emerging and Wells Fargo
Assuming the 90 days horizon Federated Emerging is expected to generate 9.71 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Federated Emerging Market is 3.69 times less risky than Wells Fargo. It trades about 0.13 of its potential returns per unit of risk. Wells Fargo Mon is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,948 in Wells Fargo Mon on September 1, 2024 and sell it today you would earn a total of 174.00 from holding Wells Fargo Mon or generate 8.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federated Emerging Market vs. Wells Fargo Mon
Performance |
| Timeline |
| Federated Emerging Market |
| Wells Fargo Mon |
Federated Emerging and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federated Emerging and Wells Fargo
The main advantage of trading using opposite Federated Emerging and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federated Emerging 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.| Federated Emerging vs. Fidelity Advisor Financial | Federated Emerging vs. 1919 Financial Services | Federated Emerging vs. Mesirow Financial Small | Federated Emerging vs. John Hancock Financial |
| Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Ultra |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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