Correlation Between Mueller Industries and Webster Financial

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

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

Diversification Opportunities for Mueller Industries and Webster Financial

0.07

Correlation Coefficient

Mueller Industries  Webster Financial

Significant diversification

The 3 months correlation between Mueller and Webster is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Mueller Industries 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 Mueller Industries 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 Mueller Industries i.e., Mueller Industries and Webster Financial go up and down completely randomly.

Pair Corralation between Mueller Industries and Webster Financial

Assuming the 90 days horizon Mueller Industries is expected to generate 1.86 times less return on investment than Webster Financial. In addition to that, Mueller Industries is 1.22 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  4,701  in Webster Financial on October 24, 2024 and sell it today you would earn a total of  1,099  from holding Webster Financial or generate 23.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Mueller Industries  vs.  Webster Financial

Mueller Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mueller Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mueller Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Webster Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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 Mueller Industries and Webster Financial

The main advantage of trading using opposite Mueller Industries and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Industries 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 Mueller Industries 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 Anywhere module to track or share privately all of your investments from the convenience of any device.