Correlation Between LODESTAR MIN and Webster Financial

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

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

Diversification Opportunities for LODESTAR MIN and Webster Financial

0.64

Correlation Coefficient

LODESTAR MIN  Webster Financial

Poor diversification

The 3 months correlation between LODESTAR and Webster is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding LODESTAR MIN and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and LODESTAR MIN 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 LODESTAR MIN 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 LODESTAR MIN i.e., LODESTAR MIN and Webster Financial go up and down completely randomly.

Pair Corralation between LODESTAR MIN and Webster Financial

Assuming the 90 days trading horizon LODESTAR MIN is expected to generate 26.13 times more return on investment than Webster Financial. However, LODESTAR MIN is 26.13 times more volatile than Webster Financial. It trades about 0.06 of its potential returns per unit of risk. Webster Financial is currently generating about 0.04 per unit of risk. If you would invest  0.69  in LODESTAR MIN on October 5, 2024 and sell it today you would earn a total of  8.08  from holding LODESTAR MIN or generate 1171.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

LODESTAR MIN  vs.  Webster Financial

LODESTAR MIN

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days LODESTAR MIN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain forward-looking indicators, LODESTAR MIN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Webster Financial

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Webster Financial has generated negative risk-adjusted returns adding no value to investors with long positions. 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 LODESTAR MIN and Webster Financial

The main advantage of trading using opposite LODESTAR MIN and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LODESTAR MIN 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 LODESTAR MIN 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.