Correlation Between Webster Financial and Tower Semiconductor
Can any of the company-specific risk be diversified away by investing in both Webster Financial and Tower Semiconductor 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 Tower Semiconductor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Webster Financial and Tower Semiconductor, you can compare the effects of market volatilities on Webster Financial and Tower Semiconductor 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 Tower Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and Tower Semiconductor.
Diversification Opportunities for Webster Financial and Tower Semiconductor
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Webster and Tower is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Tower Semiconductor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tower Semiconductor 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 Tower Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tower Semiconductor has no effect on the direction of Webster Financial i.e., Webster Financial and Tower Semiconductor go up and down completely randomly.
Pair Corralation between Webster Financial and Tower Semiconductor
Assuming the 90 days horizon Webster Financial is expected to generate 1.02 times less return on investment than Tower Semiconductor. But when comparing it to its historical volatility, Webster Financial is 1.06 times less risky than Tower Semiconductor. It trades about 0.1 of its potential returns per unit of risk. Tower Semiconductor is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,098 in Tower Semiconductor on September 3, 2024 and sell it today you would earn a total of 1,317 from holding Tower Semiconductor or generate 42.51% 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. Tower Semiconductor
Performance |
| Timeline |
| Webster Financial |
| Tower Semiconductor |
Webster Financial and Tower Semiconductor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Webster Financial and Tower Semiconductor
The main advantage of trading using opposite Webster Financial and Tower Semiconductor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, Tower Semiconductor 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 Tower Semiconductor will offset losses from the drop in Tower Semiconductor's long position.| Webster Financial vs. US Bancorp | Webster Financial vs. The PNC Financial | Webster Financial vs. Fifth Third Bancorp | Webster Financial vs. Regions Financial |
| Tower Semiconductor vs. NVIDIA | Tower Semiconductor vs. Taiwan Semiconductor Manufacturing | Tower Semiconductor vs. Advanced Micro Devices | Tower Semiconductor vs. Intel |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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