Correlation Between CVW CLEANTECH and Webster Financial

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

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

Diversification Opportunities for CVW CLEANTECH and Webster Financial

0.6

Correlation Coefficient

CVW CLEANTECH  Webster Financial

Poor diversification

The 3 months correlation between CVW and Webster is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding CVW CLEANTECH INC and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and CVW CLEANTECH 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 CVW CLEANTECH INC 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 CVW CLEANTECH i.e., CVW CLEANTECH and Webster Financial go up and down completely randomly.

Pair Corralation between CVW CLEANTECH and Webster Financial

Assuming the 90 days trading horizon CVW CLEANTECH INC is expected to generate 1.73 times more return on investment than Webster Financial. However, CVW CLEANTECH is 1.73 times more volatile than Webster Financial. It trades about -0.03 of its potential returns per unit of risk. Webster Financial is currently generating about -0.1 per unit of risk. If you would invest  56.00  in CVW CLEANTECH INC on December 21, 2024 and sell it today you would lose (5.00) from holding CVW CLEANTECH INC or give up 8.93% of portfolio value over 90 days.

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

CVW CLEANTECH INC  vs.  Webster Financial

CVW CLEANTECH INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVW CLEANTECH INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, CVW CLEANTECH is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CVW CLEANTECH and Webster Financial

The main advantage of trading using opposite CVW CLEANTECH and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CLEANTECH 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 CVW CLEANTECH INC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..