Correlation Between Mfs International and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Mfs International 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 Mfs International and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mfs International Growth and Wells Fargo, you can compare the effects of market volatilities on Mfs International 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 Mfs International with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mfs International and Wells Fargo.
Diversification Opportunities for Mfs International and Wells Fargo
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mfs and Wells is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mfs International Growth and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Mfs International 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 Mfs International Growth 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 has no effect on the direction of Mfs International i.e., Mfs International and Wells Fargo go up and down completely randomly.
Pair Corralation between Mfs International and Wells Fargo
Assuming the 90 days horizon Mfs International is expected to generate 6.97 times less return on investment than Wells Fargo. But when comparing it to its historical volatility, Mfs International Growth is 1.85 times less risky than Wells Fargo. It trades about 0.03 of its potential returns per unit of risk. Wells Fargo is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,991 in Wells Fargo on January 19, 2024 and sell it today you would earn a total of 1,883 from holding Wells Fargo or generate 47.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mfs International Growth vs. Wells Fargo
Performance |
| Timeline |
| Mfs International Growth |
| Wells Fargo |
Mfs International and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mfs International and Wells Fargo
The main advantage of trading using opposite Mfs International and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mfs International 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.| Mfs International vs. Europacific Growth Fund | Mfs International vs. Europacific Growth Fund | Mfs International vs. Europacific Growth Fund |
| Wells Fargo vs. Bank of America | Wells Fargo vs. JPMorgan Chase Co | Wells Fargo vs. Toronto Dominion Bank | Wells Fargo vs. Nu Holdings |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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