Correlation Between Webster Financial and China Petroleum
Can any of the company-specific risk be diversified away by investing in both Webster Financial and China Petroleum 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 China Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and China Petroleum Chemical, you can compare the effects of market volatilities on Webster Financial and China Petroleum 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 China Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and China Petroleum.
Diversification Opportunities for Webster Financial and China Petroleum
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Webster and China is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Webster Financial i.e., Webster Financial and China Petroleum go up and down completely randomly.
Pair Corralation between Webster Financial and China Petroleum
Assuming the 90 days horizon Webster Financial is expected to generate 1.84 times more return on investment than China Petroleum. However, Webster Financial is 1.84 times more volatile than China Petroleum Chemical. It trades about 0.28 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about -0.07 per unit of risk. If you would invest 4,640 in Webster Financial on September 4, 2024 and sell it today you would earn a total of 1,160 from holding Webster Financial or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Webster Financial vs. China Petroleum Chemical
Performance |
| Timeline |
| Webster Financial |
| China Petroleum Chemical |
Webster Financial and China Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and China Petroleum
The main advantage of trading using opposite Webster Financial and China Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, China Petroleum 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 China Petroleum will offset losses from the drop in China Petroleum's long position.| Webster Financial vs. Chuangs China Investments | Webster Financial vs. PennyMac Mortgage Investment | Webster Financial vs. Gladstone Investment | Webster Financial vs. MGIC INVESTMENT |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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