Correlation Between First Republic and Webster Financial
Can any of the company-specific risk be diversified away by investing in both First Republic 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 Republic 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 Republic Bank and Webster Financial, you can compare the effects of market volatilities on First Republic 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 Republic with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Republic and Webster Financial.
Diversification Opportunities for First Republic and Webster Financial
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Webster is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Republic Bank and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and First Republic 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 Republic Bank 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 Republic i.e., First Republic and Webster Financial go up and down completely randomly.
Pair Corralation between First Republic and Webster Financial
Assuming the 90 days horizon First Republic Bank is expected to under-perform the Webster Financial. In addition to that, First Republic is 13.83 times more volatile than Webster Financial. It trades about -0.03 of its total potential returns per unit of risk. Webster Financial is currently generating about 0.07 per unit of volatility. If you would invest 3,789 in Webster Financial on August 31, 2024 and sell it today you would earn a total of 2,389 from holding Webster Financial or generate 63.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.02% |
| Values | Daily Returns |
First Republic Bank vs. Webster Financial
Performance |
| Timeline |
| First Republic Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Webster Financial |
First Republic and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Republic and Webster Financial
The main advantage of trading using opposite First Republic and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Republic 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 Republic vs. Magna International | First Republic vs. Contagious Gaming | First Republic vs. BorgWarner | First Republic vs. Cars Inc |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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