Correlation Between Webster Financial and Trustmark

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

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

Diversification Opportunities for Webster Financial and Trustmark

0.98

Correlation Coefficient

Webster Financial  Trustmark

Almost no diversification

The 3 months correlation between Webster and Trustmark is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Trustmark in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trustmark 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 Trustmark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trustmark has no effect on the direction of Webster Financial i.e., Webster Financial and Trustmark go up and down completely randomly.

Pair Corralation between Webster Financial and Trustmark

Considering the 90-day investment horizon Webster Financial is expected to under-perform the Trustmark. But the stock apears to be less risky and, when comparing its historical volatility, Webster Financial is 1.13 times less risky than Trustmark. The stock trades about -0.05 of its potential returns per unit of risk. The Trustmark is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,802  in Trustmark on September 15, 2024 and sell it today you would lose (48.00) from holding Trustmark or give up 1.26% of portfolio value over 90 days.

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

Webster Financial  vs.  Trustmark

Webster Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 11 (%) 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.

Trustmark

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trustmark are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak primary indicators, Trustmark disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Webster Financial and Trustmark

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

The idea behind Webster Financial and Trustmark 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 Global Correlations module to find global opportunities by holding instruments from different markets.