Correlation Between Wells Fargo and Total Return
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Total Return 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 Total Return into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Advantage and Total Return Bond, you can compare the effects of market volatilities on Wells Fargo and Total Return 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 Total Return. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Total Return.
Diversification Opportunities for Wells Fargo and Total Return
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WELLS and Total is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Total Return Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Bond 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 Advantage are associated (or correlated) with Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Bond has no effect on the direction of Wells Fargo i.e., Wells Fargo and Total Return go up and down completely randomly.
Pair Corralation between Wells Fargo and Total Return
Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 3.11 times more return on investment than Total Return. However, Wells Fargo is 3.11 times more volatile than Total Return Bond. It trades about 0.08 of its potential returns per unit of risk. Total Return Bond is currently generating about 0.04 per unit of risk. If you would invest 1,050 in Wells Fargo Advantage on August 30, 2024 and sell it today you would earn a total of 431.00 from holding Wells Fargo Advantage or generate 41.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Total Return Bond
Performance |
| Timeline |
| Wells Fargo Advantage |
| Total Return Bond |
Wells Fargo and Total Return Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Total Return
The main advantage of trading using opposite Wells Fargo and Total Return positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Total Return 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 Total Return will offset losses from the drop in Total Return's long position.| Wells Fargo vs. American Funds Conservative | Wells Fargo vs. Guggenheim Diversified Income | Wells Fargo vs. Lord Abbett Diversified | Wells Fargo vs. Pimco Diversified Income |
| Total Return vs. Vanguard Total Bond | Total Return vs. Vanguard Total Bond | Total Return vs. Vanguard Total Bond | Total Return vs. Bond Fund Of |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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