Correlation Between First Horizon and Webster Financial
Can any of the company-specific risk be diversified away by investing in both First Horizon 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 First Horizon and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Horizon National and Webster Financial, you can compare the effects of market volatilities on First Horizon 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 First Horizon with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Horizon and Webster Financial.
Diversification Opportunities for First Horizon and Webster Financial
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between First and Webster is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon National and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and First Horizon 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 First Horizon National 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 First Horizon i.e., First Horizon and Webster Financial go up and down completely randomly.
Pair Corralation between First Horizon and Webster Financial
Considering the 90-day investment horizon First Horizon National is expected to generate 0.82 times more return on investment than Webster Financial. However, First Horizon National is 1.22 times less risky than Webster Financial. It trades about 0.25 of its potential returns per unit of risk. Webster Financial is currently generating about 0.2 per unit of risk. If you would invest 1,553 in First Horizon National on August 31, 2024 and sell it today you would earn a total of 556.00 from holding First Horizon National or generate 35.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Horizon National vs. Webster Financial
Performance |
| Timeline |
| First Horizon National |
| Webster Financial |
First Horizon and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Horizon and Webster Financial
The main advantage of trading using opposite First Horizon and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon 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.| First Horizon vs. Zions Bancorporation | First Horizon vs. KeyCorp | First Horizon vs. Comerica | First Horizon vs. Western Alliance Bancorporation |
| Webster Financial vs. KeyCorp | Webster Financial vs. Comerica | Webster Financial vs. First Horizon National | Webster Financial vs. Western Alliance Bancorporation |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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