Correlation Between Citigroup and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Citigroup and Webster Financial 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 Citigroup and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citigroup and Webster Financial, you can compare the effects of market volatilities on Citigroup and Webster Financial 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 Citigroup with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Webster Financial.
Diversification Opportunities for Citigroup and Webster Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Citigroup and Webster is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Citigroup 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 Citigroup are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Citigroup i.e., Citigroup and Webster Financial go up and down completely randomly.
Pair Corralation between Citigroup and Webster Financial
Taking into account the 90-day investment horizon Citigroup is expected to generate 2.57 times less return on investment than Webster Financial. But when comparing it to its historical volatility, Citigroup is 1.97 times less risky than Webster Financial. It trades about 0.21 of its potential returns per unit of risk. Webster Financial is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 4,681 in Webster Financial on August 28, 2024 and sell it today you would earn a total of 1,219 from holding Webster Financial or generate 26.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citigroup vs. Webster Financial
Performance |
| Timeline |
| Citigroup |
| Webster Financial |
Citigroup and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citigroup and Webster Financial
The main advantage of trading using opposite Citigroup and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.The idea behind Citigroup and Webster Financial 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.| Webster Financial vs. Superior Plus Corp | Webster Financial vs. NMI Holdings | Webster Financial vs. Origin Agritech | Webster Financial vs. SIVERS SEMICONDUCTORS AB |
Check out your portfolio center.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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges |