Correlation Between Wells Fargo and American Funds
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and American Funds 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 American Funds 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 American Funds Emerging, you can compare the effects of market volatilities on Wells Fargo and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and American Funds.
Diversification Opportunities for Wells Fargo and American Funds
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and American is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Large and American Funds Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Emerging 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Emerging has no effect on the direction of Wells Fargo i.e., Wells Fargo and American Funds go up and down completely randomly.
Pair Corralation between Wells Fargo and American Funds
Assuming the 90 days horizon Wells Fargo is expected to generate 1.71 times less return on investment than American Funds. In addition to that, Wells Fargo is 1.94 times more volatile than American Funds Emerging. It trades about 0.02 of its total potential returns per unit of risk. American Funds Emerging is currently generating about 0.07 per unit of volatility. If you would invest 678.00 in American Funds Emerging on September 3, 2024 and sell it today you would earn a total of 96.00 from holding American Funds Emerging or generate 14.16% 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. American Funds Emerging
Performance |
| Timeline |
| Wells Fargo Large |
| American Funds Emerging |
Wells Fargo and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and American Funds
The main advantage of trading using opposite Wells Fargo and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Wells Fargo vs. Morningstar Global Income | Wells Fargo vs. Doubleline Global Bond | Wells Fargo vs. Ab Global Risk | Wells Fargo vs. Barings Global Floating |
| American Funds vs. Jennison Natural Resources | American Funds vs. Calvert Global Energy | American Funds vs. Franklin Natural Resources | American Funds vs. Invesco Energy Fund |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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