Correlation Between Wells Fargo and Thornburg Limited
Can any of the company-specific risk be diversified away by investing in both Wells Fargo and Thornburg Limited 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 Thornburg Limited 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 Thornburg Limited Term, you can compare the effects of market volatilities on Wells Fargo and Thornburg Limited 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 Thornburg Limited. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Thornburg Limited.
Diversification Opportunities for Wells Fargo and Thornburg Limited
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Wells and Thornburg is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Advantage and Thornburg Limited Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thornburg Limited Term 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 Thornburg Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thornburg Limited Term has no effect on the direction of Wells Fargo i.e., Wells Fargo and Thornburg Limited go up and down completely randomly.
Pair Corralation between Wells Fargo and Thornburg Limited
Assuming the 90 days horizon Wells Fargo Advantage is expected to generate 1.14 times more return on investment than Thornburg Limited. However, Wells Fargo is 1.14 times more volatile than Thornburg Limited Term. It trades about -0.19 of its potential returns per unit of risk. Thornburg Limited Term is currently generating about -0.34 per unit of risk. If you would invest 877.00 in Wells Fargo Advantage on January 25, 2024 and sell it today you would lose (4.00) from holding Wells Fargo Advantage or give up 0.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Wells Fargo Advantage vs. Thornburg Limited Term
Performance |
| Timeline |
| Wells Fargo Advantage |
| Thornburg Limited Term |
Wells Fargo and Thornburg Limited Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Thornburg Limited
The main advantage of trading using opposite Wells Fargo and Thornburg Limited positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, Thornburg Limited 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 Thornburg Limited will offset losses from the drop in Thornburg Limited's long position.| Wells Fargo vs. Vanguard Limited Term Tax Exempt | Wells Fargo vs. Vanguard Short Term Tax Exempt | Wells Fargo vs. Goldman Sachs Short | Wells Fargo vs. Diversified Municipal Portfolio |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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