Correlation Between Wells Fargo and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Sterling Capital 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 Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Large and Sterling Capital North, you can compare the effects of market volatilities on Wells Fargo and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Sterling Capital.
Diversification Opportunities for Wells Fargo and Sterling Capital
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and Sterling is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Large and Sterling Capital North in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital North 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 Large are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital North has no effect on the direction of Wells Fargo i.e., Wells Fargo and Sterling Capital go up and down completely randomly.
Pair Corralation between Wells Fargo and Sterling Capital
Assuming the 90 days horizon Wells Fargo Large is expected to generate 4.48 times more return on investment than Sterling Capital. However, Wells Fargo is 4.48 times more volatile than Sterling Capital North. It trades about 0.02 of its potential returns per unit of risk. Sterling Capital North is currently generating about 0.05 per unit of risk. If you would invest 654.00 in Wells Fargo Large on August 26, 2024 and sell it today you would earn a total of 39.00 from holding Wells Fargo Large or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Large vs. Sterling Capital North
Performance |
| Timeline |
| Wells Fargo Large |
| Sterling Capital North |
Wells Fargo and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Sterling Capital
The main advantage of trading using opposite Wells Fargo and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Wells Fargo vs. Rationalpier 88 Convertible | Wells Fargo vs. Mirova Global Green | Wells Fargo vs. Maryland Tax Free Bond | Wells Fargo vs. Fundvantage Trust |
| Sterling Capital vs. Sterling Capital Equity | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital Behavioral | Sterling Capital vs. Sterling Capital Behavioral |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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