Correlation Between US Bancorp and Webster Financial
Can any of the company-specific risk be diversified away by investing in both US Bancorp 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 US Bancorp and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and Webster Financial, you can compare the effects of market volatilities on US Bancorp 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 US Bancorp with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Webster Financial.
Diversification Opportunities for US Bancorp and Webster Financial
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between USB-PS and Webster is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and US Bancorp 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 US 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 US Bancorp i.e., US Bancorp and Webster Financial go up and down completely randomly.
Pair Corralation between US Bancorp and Webster Financial
Assuming the 90 days trading horizon US Bancorp is expected to under-perform the Webster Financial. But the preferred stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 1.04 times less risky than Webster Financial. The preferred stock trades about -0.04 of its potential returns per unit of risk. The Webster Financial is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 2,095 in Webster Financial on September 3, 2024 and sell it today you would lose (2.00) from holding Webster Financial or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. Webster Financial
Performance |
| Timeline |
| US Bancorp |
| Webster Financial |
US Bancorp and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Webster Financial
The main advantage of trading using opposite US Bancorp and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp 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.| US Bancorp vs. US Bancorp | US Bancorp vs. Bank of America | US Bancorp vs. US Bancorp | US Bancorp vs. JPMorgan Chase Co |
| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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