Correlation Between Webster Financial and Air Canada
Can any of the company-specific risk be diversified away by investing in both Webster Financial and Air Canada 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 Air Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and Air Canada, you can compare the effects of market volatilities on Webster Financial and Air Canada 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 Air Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and Air Canada.
Diversification Opportunities for Webster Financial and Air Canada
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Webster and Air is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Air Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Canada 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 Air Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Canada has no effect on the direction of Webster Financial i.e., Webster Financial and Air Canada go up and down completely randomly.
Pair Corralation between Webster Financial and Air Canada
Assuming the 90 days horizon Webster Financial is expected to under-perform the Air Canada. In addition to that, Webster Financial is 1.0 times more volatile than Air Canada. It trades about -0.04 of its total potential returns per unit of risk. Air Canada is currently generating about 0.17 per unit of volatility. If you would invest 1,576 in Air Canada on September 13, 2024 and sell it today you would earn a total of 101.00 from holding Air Canada or generate 6.41% 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. Air Canada
Performance |
| Timeline |
| Webster Financial |
| Air Canada |
Webster Financial and Air Canada Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and Air Canada
The main advantage of trading using opposite Webster Financial and Air Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, Air Canada 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 Air Canada will offset losses from the drop in Air Canada's long position.| Webster Financial vs. Fifth Third Bancorp | Webster Financial vs. Regions Financial | Webster Financial vs. Superior Plus Corp | Webster Financial vs. SIVERS SEMICONDUCTORS AB |
| Air Canada vs. Check Point Software | Air Canada vs. American Public Education | Air Canada vs. Magic Software Enterprises | Air Canada vs. VITEC SOFTWARE GROUP |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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