Correlation Between Wells Fargo and American Funds

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

By analyzing existing cross correlation between Wells Fargo Short Term and American Funds Conservative, you can compare the effects of market volatilities on Wells Fargo and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and American Funds.

Diversification Opportunities for Wells Fargo and American Funds

0.84

Correlation Coefficient

Wells Fargo  American Funds

Very poor diversification

The 3 months correlation between Wells and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo Short Term and American Funds Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Conse 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 Short Term are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Conse has no effect on the direction of Wells Fargo i.e., Wells Fargo and American Funds go up and down completely randomly.

Pair Corralation between Wells Fargo and American Funds

Assuming the 90 days horizon Wells Fargo is expected to generate 2.4 times less return on investment than American Funds. But when comparing it to its historical volatility, Wells Fargo Short Term is 3.1 times less risky than American Funds. It trades about 0.32 of its potential returns per unit of risk. American Funds Conservative is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,382  in American Funds Conservative on July 8, 2025 and sell it today you would earn a total of  59.00  from holding American Funds Conservative or generate 4.27% return on investment over 90 days.

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

Wells Fargo Short Term  vs.  American Funds Conservative

Wells Fargo Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wells Fargo Short Term are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Wells Fargo is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Funds Conse

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Funds Conservative are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, American Funds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wells Fargo and American Funds

The main advantage of trading using opposite Wells Fargo and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.

The idea behind Wells Fargo Short Term and American Funds Conservative 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 Global Correlations module to find global opportunities by holding instruments from different markets.