Correlation Between Japan Asia and Webster Financial

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

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

Diversification Opportunities for Japan Asia and Webster Financial

-0.82

Correlation Coefficient

Japan Asia  Webster Financial

Pay attention - limited upside

The 3 months correlation between Japan and Webster is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Japan Asia Investment and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Japan Asia 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 Japan Asia Investment 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 Japan Asia i.e., Japan Asia and Webster Financial go up and down completely randomly.

Pair Corralation between Japan Asia and Webster Financial

Assuming the 90 days horizon Japan Asia Investment is expected to generate 1.35 times more return on investment than Webster Financial. However, Japan Asia is 1.35 times more volatile than Webster Financial. It trades about 0.2 of its potential returns per unit of risk. Webster Financial is currently generating about -0.04 per unit of risk. If you would invest  128.00  in Japan Asia Investment on December 29, 2024 and sell it today you would earn a total of  50.00  from holding Japan Asia Investment or generate 39.06% return on investment over 90 days.

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

Japan Asia Investment  vs.  Webster Financial

Japan Asia Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Asia Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Asia reported solid returns over the last few months and may actually be approaching a breakup point.

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. Despite nearly stable basic indicators, Webster Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Japan Asia and Webster Financial

The main advantage of trading using opposite Japan Asia and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Asia 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 Japan Asia Investment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.