Correlation Between Webster Financial and Host Hotels
Can any of the company-specific risk be diversified away by investing in both Webster Financial and Host Hotels 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 Host Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and Host Hotels Resorts, you can compare the effects of market volatilities on Webster Financial and Host Hotels 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 Host Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and Host Hotels.
Diversification Opportunities for Webster Financial and Host Hotels
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Webster and Host is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts 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 Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of Webster Financial i.e., Webster Financial and Host Hotels go up and down completely randomly.
Pair Corralation between Webster Financial and Host Hotels
Assuming the 90 days horizon Webster Financial is expected to generate 1.79 times more return on investment than Host Hotels. However, Webster Financial is 1.79 times more volatile than Host Hotels Resorts. It trades about 0.25 of its potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.19 per unit of risk. If you would invest 4,760 in Webster Financial on September 1, 2024 and sell it today you would earn a total of 1,090 from holding Webster Financial or generate 22.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Webster Financial vs. Host Hotels Resorts
Performance |
| Timeline |
| Webster Financial |
| Host Hotels Resorts |
Webster Financial and Host Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and Host Hotels
The main advantage of trading using opposite Webster Financial and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, Host Hotels 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 Host Hotels will offset losses from the drop in Host Hotels' long position.| Webster Financial vs. Fifth Third Bancorp | Webster Financial vs. Regions Financial | Webster Financial vs. Superior Plus Corp | Webster Financial vs. Origin Agritech |
| Host Hotels vs. Pebblebrook Hotel Trust | Host Hotels vs. Sunstone Hotel Investors | Host Hotels vs. ASHFORD HOSPITTRUST |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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