Correlation Between Webster Financial and AUREA SA

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

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

Diversification Opportunities for Webster Financial and AUREA SA

0.86

Correlation Coefficient

Webster Financial  AUREA SA

Very poor diversification

The 3 months correlation between Webster and AUREA is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and AUREA SA INH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AUREA SA INH 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 AUREA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AUREA SA INH has no effect on the direction of Webster Financial i.e., Webster Financial and AUREA SA go up and down completely randomly.

Pair Corralation between Webster Financial and AUREA SA

Assuming the 90 days horizon Webster Financial is expected to generate 1.4 times more return on investment than AUREA SA. However, Webster Financial is 1.4 times more volatile than AUREA SA INH. It trades about 0.18 of its potential returns per unit of risk. AUREA SA INH is currently generating about 0.11 per unit of risk. If you would invest  3,829  in Webster Financial on April 20, 2025 and sell it today you would earn a total of  1,171  from holding Webster Financial or generate 30.58% 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.  AUREA SA INH

Webster Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 13 (%) 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.

AUREA SA INH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AUREA SA INH are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AUREA SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Webster Financial and AUREA SA

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

The idea behind Webster Financial and AUREA SA INH 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.