Correlation Between Webster Financial and Swiss Life

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

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

Diversification Opportunities for Webster Financial and Swiss Life

0.56

Correlation Coefficient

Webster Financial  Swiss Life

Very weak diversification

The 3 months correlation between Webster and Swiss is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Webster Financial and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding 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 Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Webster Financial i.e., Webster Financial and Swiss Life go up and down completely randomly.

Pair Corralation between Webster Financial and Swiss Life

Assuming the 90 days horizon Webster Financial is expected to generate 1.33 times more return on investment than Swiss Life. However, Webster Financial is 1.33 times more volatile than Swiss Life Holding. It trades about 0.19 of its potential returns per unit of risk. Swiss Life Holding is currently generating about 0.02 per unit of risk. If you would invest  3,887  in Webster Financial on September 13, 2024 and sell it today you would earn a total of  1,663  from holding Webster Financial or generate 42.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Webster Financial  vs.  Swiss Life Holding

Webster Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Webster Financial are ranked lower than 15 (%) 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.

Swiss Life Holding

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Swiss Life Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Swiss Life is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Webster Financial and Swiss Life

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

The idea behind Webster Financial and Swiss Life Holding 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.

Check out your portfolio center.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.