Correlation Between FNB Corp and Webster Financial

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

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

Diversification Opportunities for FNB Corp and Webster Financial

0.98

Correlation Coefficient

FNB Corp  Webster Financial

Almost no diversification

The 3 months correlation between FNB and Webster is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding FNB Corp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and FNB Corp 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 FNB 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 FNB Corp i.e., FNB Corp and Webster Financial go up and down completely randomly.

Pair Corralation between FNB Corp and Webster Financial

Considering the 90-day investment horizon FNB Corp is expected to under-perform the Webster Financial. But the stock apears to be less risky and, when comparing its historical volatility, FNB Corp is 1.14 times less risky than Webster Financial. The stock trades about -0.05 of its potential returns per unit of risk. The Webster Financial is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  5,545  in Webster Financial on December 26, 2024 and sell it today you would lose (278.00) from holding Webster Financial or give up 5.01% of portfolio value over 90 days.

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

FNB Corp  vs.  Webster Financial

FNB Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FNB Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FNB Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Webster Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Webster Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Webster Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FNB Corp and Webster Financial

The main advantage of trading using opposite FNB Corp and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FNB Corp 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 FNB 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..