Correlation Between Wells Fargo and Vanguard High-yield
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Vanguard High-yield 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 High-yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Short Term and Vanguard High Yield Corporate, you can compare the effects of market volatilities on Wells Fargo and Vanguard High-yield 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 High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Vanguard High-yield.
Diversification Opportunities for Wells Fargo and Vanguard High-yield
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Vanguard is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Short Term and Vanguard High Yield Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard High Yield 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 Short Term are associated (or correlated) with Vanguard High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard High Yield has no effect on the direction of Wells Fargo i.e., Wells Fargo and Vanguard High-yield go up and down completely randomly.
Pair Corralation between Wells Fargo and Vanguard High-yield
Assuming the 90 days horizon Wells Fargo is expected to generate 1.52 times less return on investment than Vanguard High-yield. But when comparing it to its historical volatility, Wells Fargo Short Term is 1.38 times less risky than Vanguard High-yield. It trades about 0.17 of its potential returns per unit of risk. Vanguard High Yield Corporate is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 545.00 in Vanguard High Yield Corporate on September 4, 2024 and sell it today you would earn a total of 3.00 from holding Vanguard High Yield Corporate or generate 0.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Wells Fargo Short Term vs. Vanguard High Yield Corporate
Performance |
| Timeline |
| Wells Fargo Short |
| Vanguard High Yield |
Wells Fargo and Vanguard High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Vanguard High-yield
The main advantage of trading using opposite Wells Fargo and Vanguard High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Vanguard High-yield 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 High-yield will offset losses from the drop in Vanguard High-yield's long position.| Wells Fargo vs. Wt Mutual Fund | Wells Fargo vs. Dws Government Money | Wells Fargo vs. Wells Fargo Funds | Wells Fargo vs. Wilmington Funds |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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