Correlation Between GEELY AUTOMOBILE and Webster Financial

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

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

Diversification Opportunities for GEELY AUTOMOBILE and Webster Financial

0.68

Correlation Coefficient

GEELY AUTOMOBILE  Webster Financial

Poor diversification

The 3 months correlation between GEELY and Webster is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding GEELY AUTOMOBILE and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 GEELY AUTOMOBILE i.e., GEELY AUTOMOBILE and Webster Financial go up and down completely randomly.

Pair Corralation between GEELY AUTOMOBILE and Webster Financial

Assuming the 90 days trading horizon GEELY AUTOMOBILE is expected to generate 2.01 times less return on investment than Webster Financial. In addition to that, GEELY AUTOMOBILE is 1.17 times more volatile than Webster Financial. It trades about 0.06 of its total potential returns per unit of risk. Webster Financial is currently generating about 0.14 per unit of volatility. If you would invest  4,165  in Webster Financial on October 5, 2024 and sell it today you would earn a total of  1,085  from holding Webster Financial or generate 26.05% return on investment over 90 days.

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

GEELY AUTOMOBILE  vs.  Webster Financial

GEELY AUTOMOBILE

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days GEELY AUTOMOBILE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, GEELY AUTOMOBILE unveiled 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 GEELY AUTOMOBILE and Webster Financial

The main advantage of trading using opposite GEELY AUTOMOBILE and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.