Correlation Between Webster Financial and International Bancshares
Can any of the company-specific risk be diversified away by investing in both Webster Financial and International Bancshares 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 Webster Financial and International Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and International Bancshares, you can compare the effects of market volatilities on Webster Financial and International Bancshares 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 Webster Financial with a short position of International Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and International Bancshares.
Diversification Opportunities for Webster Financial and International Bancshares
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Webster and International is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares and Webster Financial 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 Webster Financial are associated (or correlated) with International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of Webster Financial i.e., Webster Financial and International Bancshares go up and down completely randomly.
Pair Corralation between Webster Financial and International Bancshares
Considering the 90-day investment horizon Webster Financial is expected to generate 1.14 times more return on investment than International Bancshares. However, Webster Financial is 1.14 times more volatile than International Bancshares. It trades about 0.22 of its potential returns per unit of risk. International Bancshares is currently generating about 0.22 per unit of risk. If you would invest 5,024 in Webster Financial on September 4, 2024 and sell it today you would earn a total of 1,006 from holding Webster Financial or generate 20.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Webster Financial vs. International Bancshares
Performance |
| Timeline |
| Webster Financial |
| International Bancshares |
Webster Financial and International Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and International Bancshares
The main advantage of trading using opposite Webster Financial and International Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, International Bancshares 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 International Bancshares will offset losses from the drop in International Bancshares' long position.| Webster Financial vs. International Bancshares | Webster Financial vs. Finward Bancorp | Webster Financial vs. Aquagold International | Webster Financial vs. Thrivent High Yield |
| International Bancshares vs. Home Federal Bancorp | International Bancshares vs. First Financial Northwest | International Bancshares vs. First Northwest Bancorp | International Bancshares vs. First Capital |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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