Correlation Between Capital Income and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Capital Income 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 Capital Income and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Wells Fargo Advantage, you can compare the effects of market volatilities on Capital Income 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 Capital Income with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Wells Fargo.
Diversification Opportunities for Capital Income and Wells Fargo
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Wells is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Wells Fargo Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Advantage and Capital Income 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 Capital Income Builder 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 Advantage has no effect on the direction of Capital Income i.e., Capital Income and Wells Fargo go up and down completely randomly.
Pair Corralation between Capital Income and Wells Fargo
Assuming the 90 days horizon Capital Income Builder is expected to under-perform the Wells Fargo. In addition to that, Capital Income is 1.06 times more volatile than Wells Fargo Advantage. It trades about -0.1 of its total potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.17 per unit of volatility. If you would invest 1,192 in Wells Fargo Advantage on September 12, 2024 and sell it today you would earn a total of 16.00 from holding Wells Fargo Advantage or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Wells Fargo Advantage
Performance |
| Timeline |
| Capital Income Builder |
| Wells Fargo Advantage |
Capital Income and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Wells Fargo
The main advantage of trading using opposite Capital Income and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income 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.| Capital Income vs. Artisan Emerging Markets | Capital Income vs. Investec Emerging Markets | Capital Income vs. Black Oak Emerging | Capital Income vs. Transamerica Emerging Markets |
| Wells Fargo vs. Capital Income Builder | Wells Fargo vs. Capital Income Builder | Wells Fargo vs. Capital Income Builder | Wells Fargo vs. Capital Income Builder |
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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