Correlation Between Webster Financial and PREMIER FOODS

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

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

Diversification Opportunities for Webster Financial and PREMIER FOODS

0.52

Correlation Coefficient

Webster Financial  PREMIER FOODS

Very weak diversification

The 3 months correlation between Webster and PREMIER is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and PREMIER FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PREMIER FOODS 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 PREMIER FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PREMIER FOODS has no effect on the direction of Webster Financial i.e., Webster Financial and PREMIER FOODS go up and down completely randomly.

Pair Corralation between Webster Financial and PREMIER FOODS

Assuming the 90 days horizon Webster Financial is expected to under-perform the PREMIER FOODS. In addition to that, Webster Financial is 1.28 times more volatile than PREMIER FOODS. It trades about -0.39 of its total potential returns per unit of risk. PREMIER FOODS is currently generating about -0.13 per unit of volatility. If you would invest  232.00  in PREMIER FOODS on September 29, 2024 and sell it today you would lose (6.00) from holding PREMIER FOODS or give up 2.59% of portfolio value over 90 days.

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

Webster Financial  vs.  PREMIER FOODS

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. Despite nearly fragile basic indicators, Webster Financial reported solid returns over the last few months and may actually be approaching a breakup point.

PREMIER FOODS

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PREMIER FOODS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, PREMIER FOODS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Webster Financial and PREMIER FOODS

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

The idea behind Webster Financial and PREMIER FOODS 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.