Correlation Between Webster Financial and RCI Hospitality
Can any of the company-specific risk be diversified away by investing in both Webster Financial and RCI Hospitality 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 RCI Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and RCI Hospitality Holdings, you can compare the effects of market volatilities on Webster Financial and RCI Hospitality 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 RCI Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and RCI Hospitality.
Diversification Opportunities for Webster Financial and RCI Hospitality
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Webster and RCI is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings 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 RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of Webster Financial i.e., Webster Financial and RCI Hospitality go up and down completely randomly.
Pair Corralation between Webster Financial and RCI Hospitality
Assuming the 90 days horizon Webster Financial is expected to generate 1.38 times more return on investment than RCI Hospitality. However, Webster Financial is 1.38 times more volatile than RCI Hospitality Holdings. It trades about 0.29 of its potential returns per unit of risk. RCI Hospitality Holdings is currently generating about -0.35 per unit of risk. If you would invest 5,300 in Webster Financial on October 25, 2024 and sell it today you would earn a total of 500.00 from holding Webster Financial or generate 9.43% 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. RCI Hospitality Holdings
Performance |
| Timeline |
| Webster Financial |
| RCI Hospitality Holdings |
Webster Financial and RCI Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and RCI Hospitality
The main advantage of trading using opposite Webster Financial and RCI Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, RCI Hospitality 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 RCI Hospitality will offset losses from the drop in RCI Hospitality's long position.| Webster Financial vs. Tower Semiconductor | Webster Financial vs. Fast Retailing Co | Webster Financial vs. PICKN PAY STORES | Webster Financial vs. H2O Retailing |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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