Correlation Between Municipal Bond and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Municipal Bond 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 Municipal Bond and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Municipal Bond Fund and Wells Fargo Advantage, you can compare the effects of market volatilities on Municipal Bond 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 Municipal Bond with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Municipal Bond and Wells Fargo.
Diversification Opportunities for Municipal Bond and Wells Fargo
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Municipal and Wells is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Municipal Bond Fund and Wells Fargo Advantage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Advantage and Municipal Bond 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 Municipal Bond Fund 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 Advantage has no effect on the direction of Municipal Bond i.e., Municipal Bond and Wells Fargo go up and down completely randomly.
Pair Corralation between Municipal Bond and Wells Fargo
Assuming the 90 days horizon Municipal Bond Fund is expected to generate 1.55 times more return on investment than Wells Fargo. However, Municipal Bond is 1.55 times more volatile than Wells Fargo Advantage. It trades about 0.16 of its potential returns per unit of risk. Wells Fargo Advantage is currently generating about 0.11 per unit of risk. If you would invest 974.00 in Municipal Bond Fund on August 29, 2024 and sell it today you would earn a total of 10.00 from holding Municipal Bond Fund or generate 1.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Municipal Bond Fund vs. Wells Fargo Advantage
Performance |
| Timeline |
| Municipal Bond |
| Wells Fargo Advantage |
Municipal Bond and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Municipal Bond and Wells Fargo
The main advantage of trading using opposite Municipal Bond and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Municipal Bond 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.| Municipal Bond vs. Wells Fargo Advantage | Municipal Bond vs. Wells Fargo Advantage | Municipal Bond vs. Wells Fargo Advantage | Municipal Bond vs. Wells Fargo Ultra |
| Wells Fargo vs. Municipal Bond Fund | Wells Fargo vs. Thornburg Limited Term | Wells Fargo vs. Wells Fargo Advantage | Wells Fargo vs. Wells Fargo Advantage |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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