Correlation Between Wells Fargo and Cutler Equity
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Cutler Equity 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 Cutler Equity 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 Cutler Equity, you can compare the effects of market volatilities on Wells Fargo and Cutler Equity 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 Cutler Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Cutler Equity.
Diversification Opportunities for Wells Fargo and Cutler Equity
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and Cutler is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Cutler Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cutler Equity 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 Cutler Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cutler Equity has no effect on the direction of Wells Fargo i.e., Wells Fargo and Cutler Equity go up and down completely randomly.
Pair Corralation between Wells Fargo and Cutler Equity
Assuming the 90 days horizon Wells Fargo Advantage is expected to under-perform the Cutler Equity. In addition to that, Wells Fargo is 2.05 times more volatile than Cutler Equity. It trades about -0.31 of its total potential returns per unit of risk. Cutler Equity is currently generating about -0.08 per unit of volatility. If you would invest 2,783 in Cutler Equity on November 28, 2024 and sell it today you would lose (22.00) from holding Cutler Equity or give up 0.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Cutler Equity
Performance |
| Timeline |
| Wells Fargo Advantage |
| Cutler Equity |
Wells Fargo and Cutler Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Cutler Equity
The main advantage of trading using opposite Wells Fargo and Cutler Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Cutler Equity 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 Cutler Equity will offset losses from the drop in Cutler Equity's long position.| Wells Fargo vs. Small Pany Growth | Wells Fargo vs. Touchstone Sands Capital | Wells Fargo vs. Templeton Growth Fund | Wells Fargo vs. Profunds Large Cap Growth |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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