Correlation Between VMware and Wells Fargo

Can any of the company-specific risk be diversified away by investing in both VMware 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 VMware and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VMware Inc and Wells Fargo Special, you can compare the effects of market volatilities on VMware 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 VMware with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of VMware and Wells Fargo.

Diversification Opportunities for VMware and Wells Fargo

0.0

Correlation Coefficient

VMware  Wells Fargo

Pay attention - limited upside

The 3 months correlation between VMware and Wells is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding VMware Inc and Wells Fargo Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Special and VMware 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 VMware Inc 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 Special has no effect on the direction of VMware i.e., VMware and Wells Fargo go up and down completely randomly.

Pair Corralation between VMware and Wells Fargo

If you would invest  12,810  in VMware Inc on January 20, 2024 and sell it today you would earn a total of  1,438  from holding VMware Inc or generate 11.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.27%
Values	Daily Returns

VMware Inc  vs.  Wells Fargo Special

VMware Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VMware Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, VMware is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Wells Fargo Special

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wells Fargo Special has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with VMware and Wells Fargo

The main advantage of trading using opposite VMware and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VMware 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.

The idea behind VMware Inc and Wells Fargo Special pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stocks Directory module to find actively traded stocks across global markets.