Correlation Between Applied Finance and Wells Fargo

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

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

Diversification Opportunities for Applied Finance and Wells Fargo

0.95

Correlation Coefficient

Applied Finance  Wells Fargo

Almost no diversification

The 3 months correlation between Applied and Wells is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Wells Fargo Mon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo Mon and Applied Finance 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 Applied Finance Explorer 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 Mon has no effect on the direction of Applied Finance i.e., Applied Finance and Wells Fargo go up and down completely randomly.

Pair Corralation between Applied Finance and Wells Fargo

Assuming the 90 days horizon Applied Finance is expected to generate 1.23 times less return on investment than Wells Fargo. In addition to that, Applied Finance is 1.06 times more volatile than Wells Fargo Mon. It trades about 0.16 of its total potential returns per unit of risk. Wells Fargo Mon is currently generating about 0.21 per unit of volatility. If you would invest  1,659  in Wells Fargo Mon on May 1, 2025 and sell it today you would earn a total of  224.00  from holding Wells Fargo Mon or generate 13.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Applied Finance Explorer  vs.  Wells Fargo Mon

Applied Finance Explorer

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Finance Explorer are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Applied Finance may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Wells Fargo Mon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Mon are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Wells Fargo showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Finance and Wells Fargo

The main advantage of trading using opposite Applied Finance and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance 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 Applied Finance Explorer and Wells Fargo Mon 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.