Correlation Between Wells Fargo and Global Small
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Global Small 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 Global Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Funds and Global Small Cap, you can compare the effects of market volatilities on Wells Fargo and Global Small 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 Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Global Small.
Diversification Opportunities for Wells Fargo and Global Small
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wells and Global is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Funds and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap 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 Funds are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Wells Fargo i.e., Wells Fargo and Global Small go up and down completely randomly.
Pair Corralation between Wells Fargo and Global Small
Assuming the 90 days horizon Wells Fargo is expected to generate 8.08 times less return on investment than Global Small. But when comparing it to its historical volatility, Wells Fargo Funds is 5.47 times less risky than Global Small. It trades about 0.06 of its potential returns per unit of risk. Global Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,589 in Global Small Cap on September 3, 2024 and sell it today you would earn a total of 415.00 from holding Global Small Cap or generate 26.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Wells Fargo Funds vs. Global Small Cap
Performance |
| Timeline |
| Wells Fargo Funds |
| Global Small Cap |
Wells Fargo and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Global Small
The main advantage of trading using opposite Wells Fargo and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Global Small 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 Global Small will offset losses from the drop in Global Small's long position.| Wells Fargo vs. Vanguard Total Stock | Wells Fargo vs. Vanguard 500 Index | Wells Fargo vs. Vanguard Total Stock | Wells Fargo vs. Vanguard Total Stock |
| Global Small vs. Wells Fargo Funds | Global Small vs. Aig Government Money | Global Small vs. Hsbc Treasury Money | Global Small vs. John Hancock Money |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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