Correlation Between National Bank and Webster Financial
Can any of the company-specific risk be diversified away by investing in both National Bank 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 National Bank and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bank Holdings and Webster Financial, you can compare the effects of market volatilities on National Bank 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 National Bank with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and Webster Financial.
Diversification Opportunities for National Bank and Webster Financial
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between National and Webster is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and National Bank 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 National Bank Holdings 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 National Bank i.e., National Bank and Webster Financial go up and down completely randomly.
Pair Corralation between National Bank and Webster Financial
Assuming the 90 days horizon National Bank is expected to generate 1.72 times less return on investment than Webster Financial. But when comparing it to its historical volatility, National Bank Holdings is 1.26 times less risky than Webster Financial. It trades about 0.17 of its potential returns per unit of risk. Webster Financial is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 4,681 in Webster Financial on August 27, 2024 and sell it today you would earn a total of 969.00 from holding Webster Financial or generate 20.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Bank Holdings vs. Webster Financial
Performance |
| Timeline |
| National Bank Holdings |
| Webster Financial |
National Bank and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bank and Webster Financial
The main advantage of trading using opposite National Bank and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bank 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.| National Bank vs. Superior Plus Corp | National Bank vs. NMI Holdings | National Bank vs. Origin Agritech | National Bank vs. SIVERS SEMICONDUCTORS AB |
| Webster Financial vs. Platinum Investment Management | Webster Financial vs. Sporttotal AG | Webster Financial vs. BII Railway Transportation | Webster Financial vs. SPORTING |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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