Correlation Between Webster Financial and TFS FINANCIAL
Can any of the company-specific risk be diversified away by investing in both Webster Financial and TFS 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 Webster Financial and TFS FINANCIAL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and TFS FINANCIAL, you can compare the effects of market volatilities on Webster Financial and TFS 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 Webster Financial with a short position of TFS FINANCIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and TFS FINANCIAL.
Diversification Opportunities for Webster Financial and TFS FINANCIAL
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Webster and TFS is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and TFS FINANCIAL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TFS FINANCIAL 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 TFS FINANCIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TFS FINANCIAL has no effect on the direction of Webster Financial i.e., Webster Financial and TFS FINANCIAL go up and down completely randomly.
Pair Corralation between Webster Financial and TFS FINANCIAL
Assuming the 90 days horizon Webster Financial is expected to generate 1.56 times more return on investment than TFS FINANCIAL. However, Webster Financial is 1.56 times more volatile than TFS FINANCIAL. It trades about 0.26 of its potential returns per unit of risk. TFS FINANCIAL is currently generating about 0.21 per unit of risk. If you would invest 4,760 in Webster Financial on August 30, 2024 and sell it today you would earn a total of 1,140 from holding Webster Financial or generate 23.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Webster Financial vs. TFS FINANCIAL
Performance |
| Timeline |
| Webster Financial |
| TFS FINANCIAL |
Webster Financial and TFS FINANCIAL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and TFS FINANCIAL
The main advantage of trading using opposite Webster Financial and TFS FINANCIAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, TFS 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 TFS FINANCIAL will offset losses from the drop in TFS FINANCIAL's long position.| Webster Financial vs. FAST RETAIL ADR | Webster Financial vs. Eidesvik Offshore ASA | Webster Financial vs. Retail Estates NV | Webster Financial vs. National Retail Properties |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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