Correlation Between Red Oak and Wells Fargo

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

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

Diversification Opportunities for Red Oak and Wells Fargo

0.55

Correlation Coefficient

Red Oak  Wells Fargo

Very weak diversification

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

Pair Corralation between Red Oak and Wells Fargo

Assuming the 90 days horizon Red Oak Technology is expected to generate 0.91 times more return on investment than Wells Fargo. However, Red Oak Technology is 1.1 times less risky than Wells Fargo. It trades about 0.27 of its potential returns per unit of risk. Wells Fargo Mon is currently generating about 0.04 per unit of risk. If you would invest  4,713  in Red Oak Technology on May 15, 2025 and sell it today you would earn a total of  715.00  from holding Red Oak Technology or generate 15.17% return on investment over 90 days.

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

Red Oak Technology  vs.  Wells Fargo Mon

Red Oak Technology

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Red Oak Technology are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Red Oak showed solid returns over the last few months and may actually be approaching a breakup point.

Wells Fargo Mon

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Mon are ranked lower than 3 (%) 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 Red Oak and Wells Fargo

The main advantage of trading using opposite Red Oak and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Oak 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 Red Oak Technology 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .