Correlation Between Smallcap Fund and Wells Fargo

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

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

Diversification Opportunities for Smallcap Fund and Wells Fargo

0.55

Correlation Coefficient

Smallcap Fund  Wells Fargo

Very weak diversification

The 3 months correlation between Smallcap and Wells is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka 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 Smallcap Fund 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 Smallcap Fund Fka 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 Smallcap Fund i.e., Smallcap Fund and Wells Fargo go up and down completely randomly.

Pair Corralation between Smallcap Fund and Wells Fargo

Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 0.94 times more return on investment than Wells Fargo. However, Smallcap Fund Fka is 1.06 times less risky than Wells Fargo. It trades about 0.22 of its potential returns per unit of risk. Wells Fargo Mon is currently generating about 0.09 per unit of risk. If you would invest  2,398  in Smallcap Fund Fka on May 21, 2025 and sell it today you would earn a total of  298.00  from holding Smallcap Fund Fka or generate 12.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Smallcap Fund Fka  vs.  Wells Fargo Mon

Smallcap Fund Fka

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Fund Fka are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Smallcap Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Wells Fargo Mon

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Mon are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Smallcap Fund and Wells Fargo

The main advantage of trading using opposite Smallcap Fund and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Fund 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 Smallcap Fund Fka 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.