Correlation Between Wells Fargo and Western Asset
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Western Asset 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 Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo Strategic and Western Asset High, you can compare the effects of market volatilities on Wells Fargo and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Western Asset.
Diversification Opportunities for Wells Fargo and Western Asset
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Wells and Western is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Strategic and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High 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 Strategic are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of Wells Fargo i.e., Wells Fargo and Western Asset go up and down completely randomly.
Pair Corralation between Wells Fargo and Western Asset
Assuming the 90 days horizon Wells Fargo Strategic is expected to generate 1.08 times more return on investment than Western Asset. However, Wells Fargo is 1.08 times more volatile than Western Asset High. It trades about 0.24 of its potential returns per unit of risk. Western Asset High is currently generating about 0.2 per unit of risk. If you would invest 882.00 in Wells Fargo Strategic on September 1, 2024 and sell it today you would earn a total of 7.00 from holding Wells Fargo Strategic or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wells Fargo Strategic vs. Western Asset High
Performance |
| Timeline |
| Wells Fargo Strategic |
| Western Asset High |
Wells Fargo and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Western Asset
The main advantage of trading using opposite Wells Fargo and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Wells Fargo vs. T Rowe Price | Wells Fargo vs. Goldman Sachs Large | Wells Fargo vs. Aqr Large Cap | Wells Fargo vs. Pace Large Growth |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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