Correlation Between Wells Fargo and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and ProShares UltraShort 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 ProShares UltraShort 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 ProShares UltraShort Nasdaq, you can compare the effects of market volatilities on Wells Fargo and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and ProShares UltraShort.
Diversification Opportunities for Wells Fargo and ProShares UltraShort
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Wells and ProShares is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and ProShares UltraShort Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Wells Fargo i.e., Wells Fargo and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Wells Fargo and ProShares UltraShort
Assuming the 90 days horizon Wells Fargo Advantage is expected to under-perform the ProShares UltraShort. But the mutual fund apears to be less risky and, when comparing its historical volatility, Wells Fargo Advantage is 15.97 times less risky than ProShares UltraShort. The mutual fund trades about -0.13 of its potential returns per unit of risk. The ProShares UltraShort Nasdaq is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,827 in ProShares UltraShort Nasdaq on January 16, 2024 and sell it today you would earn a total of 178.00 from holding ProShares UltraShort Nasdaq or generate 9.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo Advantage vs. ProShares UltraShort Nasdaq
Performance |
| Timeline |
| Wells Fargo Advantage |
| ProShares UltraShort |
Wells Fargo and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and ProShares UltraShort
The main advantage of trading using opposite Wells Fargo and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort's long position.| Wells Fargo vs. Wells Fargo Ultra | Wells Fargo vs. Wells Fargo Ultra | Wells Fargo vs. Wells Fargo Emerging | Wells Fargo vs. Wells Fargo Emerging |
| ProShares UltraShort vs. ProShares Ultra Nasdaq | ProShares UltraShort vs. ProShares UltraShort MSCI | ProShares UltraShort vs. ProShares UltraShort Health | ProShares UltraShort vs. ProShares UltraShort FTSE |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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