Correlation Between Webster Financial and HomeTrust Bancshares

Can any of the company-specific risk be diversified away by investing in both Webster Financial and HomeTrust 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 HomeTrust 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 HomeTrust Bancshares, you can compare the effects of market volatilities on Webster Financial and HomeTrust 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 HomeTrust Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Webster Financial and HomeTrust Bancshares.

Diversification Opportunities for Webster Financial and HomeTrust Bancshares

0.89

Correlation Coefficient

Webster Financial  HomeTrust Bancshares

Very poor diversification

The 3 months correlation between Webster and HomeTrust is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and HomeTrust Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeTrust 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 HomeTrust Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeTrust Bancshares has no effect on the direction of Webster Financial i.e., Webster Financial and HomeTrust Bancshares go up and down completely randomly.

Pair Corralation between Webster Financial and HomeTrust Bancshares

Considering the 90-day investment horizon Webster Financial is expected to under-perform the HomeTrust Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Webster Financial is 1.04 times less risky than HomeTrust Bancshares. The stock trades about -0.34 of its potential returns per unit of risk. The HomeTrust Bancshares is currently generating about -0.31 of returns per unit of risk over similar time horizon. If you would invest  3,786  in HomeTrust Bancshares on September 27, 2024 and sell it today you would lose (373.00) from holding HomeTrust Bancshares or give up 9.85% of portfolio value over 90 days.

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

Webster Financial  vs.  HomeTrust 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.

HomeTrust Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HomeTrust Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, HomeTrust Bancshares is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Webster Financial and HomeTrust Bancshares

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

The idea behind Webster Financial and HomeTrust 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.