Correlation Between Webster Financial and Virtu Financial

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

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

Diversification Opportunities for Webster Financial and Virtu Financial

0.89

Correlation Coefficient

Webster Financial  Virtu Financial

Very poor diversification

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

Pair Corralation between Webster Financial and Virtu Financial

Assuming the 90 days horizon Webster Financial is expected to generate 18.17 times less return on investment than Virtu Financial. In addition to that, Webster Financial is 1.03 times more volatile than Virtu Financial. It trades about 0.01 of its total potential returns per unit of risk. Virtu Financial is currently generating about 0.17 per unit of volatility. If you would invest  3,139  in Virtu Financial on October 9, 2024 and sell it today you would earn a total of  341.00  from holding Virtu Financial or generate 10.86% return on investment over 90 days.

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

Webster Financial  vs.  Virtu Financial

Webster Financial

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Webster Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Virtu Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Virtu Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtu Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Webster Financial and Virtu Financial

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

The idea behind Webster Financial and Virtu 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.