Correlation Between Third Avenue and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Third Avenue 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 Third Avenue and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Third Avenue Real and Wells Fargo Global, you can compare the effects of market volatilities on Third Avenue 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 Third Avenue with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Third Avenue and Wells Fargo.
Diversification Opportunities for Third Avenue and Wells Fargo
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Third and Wells is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Third Avenue Real and Wells Fargo Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Global and Third Avenue 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 Third Avenue Real 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 Global has no effect on the direction of Third Avenue i.e., Third Avenue and Wells Fargo go up and down completely randomly.
Pair Corralation between Third Avenue and Wells Fargo
Assuming the 90 days horizon Third Avenue Real is expected to generate 1.28 times more return on investment than Wells Fargo. However, Third Avenue is 1.28 times more volatile than Wells Fargo Global. It trades about 0.01 of its potential returns per unit of risk. Wells Fargo Global is currently generating about -0.05 per unit of risk. If you would invest 2,563 in Third Avenue Real on September 12, 2024 and sell it today you would earn a total of 4.00 from holding Third Avenue Real or generate 0.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Third Avenue Real vs. Wells Fargo Global
Performance |
| Timeline |
| Third Avenue Real |
| Wells Fargo Global |
Third Avenue and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Third Avenue and Wells Fargo
The main advantage of trading using opposite Third Avenue and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Third Avenue 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.| Third Avenue vs. Third Avenue Small Cap | Third Avenue vs. Baron Real Estate | Third Avenue vs. Third Avenue Value | Third Avenue vs. Artisan Global Value |
| Wells Fargo vs. Third Avenue Real | Wells Fargo vs. Third Avenue Small Cap | Wells Fargo vs. Smead Value Fund | Wells Fargo vs. Baron Focused Growth |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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