Correlation Between AEGEAN AIRLINES and Webster Financial

Can any of the company-specific risk be diversified away by investing in both AEGEAN AIRLINES and Webster 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 AEGEAN AIRLINES and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEGEAN AIRLINES and Webster Financial, you can compare the effects of market volatilities on AEGEAN AIRLINES and Webster 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 AEGEAN AIRLINES with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of AEGEAN AIRLINES and Webster Financial.

Diversification Opportunities for AEGEAN AIRLINES and Webster Financial

-0.74

Correlation Coefficient

AEGEAN AIRLINES  Webster Financial

Pay attention - limited upside

The 3 months correlation between AEGEAN and Webster is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding AEGEAN AIRLINES and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and AEGEAN AIRLINES 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 AEGEAN AIRLINES are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of AEGEAN AIRLINES i.e., AEGEAN AIRLINES and Webster Financial go up and down completely randomly.

Pair Corralation between AEGEAN AIRLINES and Webster Financial

Assuming the 90 days trading horizon AEGEAN AIRLINES is expected to generate 0.79 times more return on investment than Webster Financial. However, AEGEAN AIRLINES is 1.27 times less risky than Webster Financial. It trades about 0.17 of its potential returns per unit of risk. Webster Financial is currently generating about -0.26 per unit of risk. If you would invest  990.00  in AEGEAN AIRLINES on October 9, 2024 and sell it today you would earn a total of  34.00  from holding AEGEAN AIRLINES or generate 3.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	94.12%
Values	Daily Returns

AEGEAN AIRLINES  vs.  Webster Financial

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AEGEAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Webster Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Webster Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AEGEAN AIRLINES and Webster Financial

The main advantage of trading using opposite AEGEAN AIRLINES and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AEGEAN AIRLINES position performs unexpectedly, Webster 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 Webster Financial will offset losses from the drop in Webster Financial's long position.

The idea behind AEGEAN AIRLINES and Webster Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.