Correlation Between Fifth Third and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Fifth Third 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 Fifth Third and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and Webster Financial, you can compare the effects of market volatilities on Fifth Third 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 Fifth Third with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Webster Financial.
Diversification Opportunities for Fifth Third and Webster Financial
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fifth and Webster is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Fifth Third 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 Fifth Third Bancorp 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 Fifth Third i.e., Fifth Third and Webster Financial go up and down completely randomly.
Pair Corralation between Fifth Third and Webster Financial
Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 0.82 times more return on investment than Webster Financial. However, Fifth Third Bancorp is 1.23 times less risky than Webster Financial. It trades about 0.05 of its potential returns per unit of risk. Webster Financial is currently generating about 0.04 per unit of risk. If you would invest 3,167 in Fifth Third Bancorp on August 31, 2024 and sell it today you would earn a total of 1,639 from holding Fifth Third Bancorp or generate 51.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.79% |
| Values | Daily Returns |
Fifth Third Bancorp vs. Webster Financial
Performance |
| Timeline |
| Fifth Third Bancorp |
| Webster Financial |
Fifth Third and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and Webster Financial
The main advantage of trading using opposite Fifth Third and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third 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.| Fifth Third vs. KeyCorp | Fifth Third vs. Regions Financial | Fifth Third vs. Zions Bancorporation | Fifth Third vs. Huntington Bancshares Incorporated |
| 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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