Correlation Between Webster Financial and Affinity Bancshares

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

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

Diversification Opportunities for Webster Financial and Affinity Bancshares

0.24

Correlation Coefficient

Webster Financial  Affinity Bancshares

Modest diversification

The 3 months correlation between Webster and Affinity is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Webster Financial 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 Webster Financial are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Webster Financial i.e., Webster Financial and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Webster Financial and Affinity Bancshares

Considering the 90-day investment horizon Webster Financial is expected to under-perform the Affinity Bancshares. In addition to that, Webster Financial is 1.43 times more volatile than Affinity Bancshares. It trades about -0.45 of its total potential returns per unit of risk. Affinity Bancshares is currently generating about 0.12 per unit of volatility. If you would invest  2,145  in Affinity Bancshares on September 25, 2024 and sell it today you would earn a total of  50.00  from holding Affinity Bancshares or generate 2.33% return on investment over 90 days.

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

Webster Financial  vs.  Affinity Bancshares

Webster Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Webster Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Affinity Bancshares

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Webster Financial and Affinity Bancshares

The main advantage of trading using opposite Webster Financial and Affinity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Webster Financial position performs unexpectedly, Affinity Bancshares 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 Affinity Bancshares will offset losses from the drop in Affinity Bancshares' long position.

The idea behind Webster Financial and Affinity Bancshares 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.