Correlation Between Webster Financial and Molson Coors

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

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

Diversification Opportunities for Webster Financial and Molson Coors

0.92

Correlation Coefficient

Webster Financial  Molson Coors

Almost no diversification

The 3 months correlation between Webster and Molson is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Webster Financial i.e., Webster Financial and Molson Coors go up and down completely randomly.

Pair Corralation between Webster Financial and Molson Coors

Assuming the 90 days horizon Webster Financial is expected to generate 1.84 times more return on investment than Molson Coors. However, Webster Financial is 1.84 times more volatile than Molson Coors Beverage. It trades about 0.11 of its potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.13 per unit of risk. If you would invest  4,244  in Webster Financial on September 23, 2024 and sell it today you would earn a total of  956.00  from holding Webster Financial or generate 22.53% return on investment over 90 days.

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

Webster Financial  vs.  Molson Coors Beverage

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

Molson Coors Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Molson Coors unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Webster Financial and Molson Coors

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

The idea behind Webster Financial and Molson Coors Beverage 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.