Correlation Between Sparta Capital and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Sparta Capital 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 Sparta Capital and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sparta Capital and Webster Financial, you can compare the effects of market volatilities on Sparta Capital 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 Sparta Capital with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparta Capital and Webster Financial.
Diversification Opportunities for Sparta Capital and Webster Financial
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sparta and Webster is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Sparta Capital 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 Sparta Capital 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 Sparta Capital i.e., Sparta Capital and Webster Financial go up and down completely randomly.
Pair Corralation between Sparta Capital and Webster Financial
Assuming the 90 days horizon Sparta Capital is expected to under-perform the Webster Financial. In addition to that, Sparta Capital is 2.25 times more volatile than Webster Financial. It trades about -0.09 of its total potential returns per unit of risk. Webster Financial is currently generating about 0.08 per unit of volatility. If you would invest 1,943 in Webster Financial on August 29, 2024 and sell it today you would earn a total of 174.00 from holding Webster Financial or generate 8.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sparta Capital vs. Webster Financial
Performance |
| Timeline |
| Sparta Capital |
| Webster Financial |
Sparta Capital and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sparta Capital and Webster Financial
The main advantage of trading using opposite Sparta Capital and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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.| Sparta Capital vs. Zurn Elkay Water | Sparta Capital vs. Federal Signal | Sparta Capital vs. Energy Recovery | Sparta Capital vs. CECO Environmental Corp |
| Webster Financial vs. KeyCorp | Webster Financial vs. Associated Banc Corp | Webster Financial vs. New York Community | Webster Financial vs. Synovus Financial Corp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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