Correlation Between Reinsurance Group and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Reinsurance Group 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 Reinsurance Group and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reinsurance Group of and Webster Financial, you can compare the effects of market volatilities on Reinsurance Group 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 Reinsurance Group with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reinsurance Group and Webster Financial.
Diversification Opportunities for Reinsurance Group and Webster Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Reinsurance and Webster is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Reinsurance Group of and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Reinsurance Group 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 Reinsurance Group of 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 Reinsurance Group i.e., Reinsurance Group and Webster Financial go up and down completely randomly.
Pair Corralation between Reinsurance Group and Webster Financial
Assuming the 90 days trading horizon Reinsurance Group is expected to generate 2.11 times less return on investment than Webster Financial. But when comparing it to its historical volatility, Reinsurance Group of is 1.35 times less risky than Webster Financial. It trades about 0.16 of its potential returns per unit of risk. Webster Financial is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,760 in Webster Financial on September 1, 2024 and sell it today you would earn a total of 1,090 from holding Webster Financial or generate 22.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Reinsurance Group of vs. Webster Financial
Performance |
| Timeline |
| Reinsurance Group |
| Webster Financial |
Reinsurance Group and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Reinsurance Group and Webster Financial
The main advantage of trading using opposite Reinsurance Group and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reinsurance Group 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.| Reinsurance Group vs. Superior Plus Corp | Reinsurance Group vs. Origin Agritech | Reinsurance Group vs. Identiv | Reinsurance Group vs. INTUITIVE SURGICAL |
| Webster Financial vs. Fifth Third Bancorp | Webster Financial vs. Superior Plus Corp | Webster Financial vs. Origin Agritech | Webster Financial vs. Identiv |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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