Correlation Between Associated Banc and Webster Financial

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

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

Diversification Opportunities for Associated Banc and Webster Financial

0.83

Correlation Coefficient

Associated Banc  Webster Financial

Very poor diversification

The 3 months correlation between Associated and Webster is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Associated Banc Corp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Associated Banc 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 Associated Banc Corp 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 Associated Banc i.e., Associated Banc and Webster Financial go up and down completely randomly.

Pair Corralation between Associated Banc and Webster Financial

Assuming the 90 days trading horizon Associated Banc Corp is expected to generate 0.65 times more return on investment than Webster Financial. However, Associated Banc Corp is 1.54 times less risky than Webster Financial. It trades about 0.06 of its potential returns per unit of risk. Webster Financial is currently generating about -0.22 per unit of risk. If you would invest  2,197  in Associated Banc Corp on October 6, 2024 and sell it today you would earn a total of  20.00  from holding Associated Banc Corp or generate 0.91% return on investment over 90 days.

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

Associated Banc Corp  vs.  Webster Financial

Associated Banc Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Webster Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Webster Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Associated Banc and Webster Financial

The main advantage of trading using opposite Associated Banc and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Banc 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 Associated Banc Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..