Correlation Between Webster Financial and Generations Bancorp

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

By analyzing existing cross correlation between Webster Financial and Generations Bancorp NY, you can compare the effects of market volatilities on Webster Financial and Generations Bancorp 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 Generations Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and Generations Bancorp.

Diversification Opportunities for Webster Financial and Generations Bancorp

0.36

Correlation Coefficient

Webster Financial  Generations Bancorp

Weak diversification

The 3 months correlation between Webster and Generations is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Generations Bancorp NY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generations Bancorp 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 Generations Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generations Bancorp has no effect on the direction of Webster Financial i.e., Webster Financial and Generations Bancorp go up and down completely randomly.

Pair Corralation between Webster Financial and Generations Bancorp

Considering the 90-day investment horizon Webster Financial is expected to generate 1.82 times less return on investment than Generations Bancorp. But when comparing it to its historical volatility, Webster Financial is 1.38 times less risky than Generations Bancorp. It trades about 0.03 of its potential returns per unit of risk. Generations Bancorp NY is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,080  in Generations Bancorp NY on September 21, 2024 and sell it today you would earn a total of  464.00  from holding Generations Bancorp NY or generate 42.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	89.7%
Values	Daily Returns

Webster Financial  vs.  Generations Bancorp NY

Webster Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 6 (%) 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.

Generations Bancorp

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Generations Bancorp NY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly abnormal basic indicators, Generations Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Webster Financial and Generations Bancorp

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

The idea behind Webster Financial and Generations Bancorp NY 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.