Correlation Between First Community and Webster Financial
Can any of the company-specific risk be diversified away by investing in both First Community and Webster 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 First Community and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community Bancshares and Webster Financial, you can compare the effects of market volatilities on First Community and Webster 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 First Community with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Webster Financial.
Diversification Opportunities for First Community and Webster Financial
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Webster is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Community Bancshares and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and First Community 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 First Community Bancshares are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of First Community i.e., First Community and Webster Financial go up and down completely randomly.
Pair Corralation between First Community and Webster Financial
Given the investment horizon of 90 days First Community Bancshares is expected to under-perform the Webster Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Community Bancshares is 1.17 times less risky than Webster Financial. The stock trades about -0.12 of its potential returns per unit of risk. The Webster Financial is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 6,071 in Webster Financial on August 25, 2025 and sell it today you would lose (307.00) from holding Webster Financial or give up 5.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community Bancshares vs. Webster Financial
Performance |
| Timeline |
| First Community Banc |
| Webster Financial |
First Community and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Webster Financial
The main advantage of trading using opposite First Community and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Webster 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 Webster Financial will offset losses from the drop in Webster Financial's long position.| First Community vs. SmartFinancial, | First Community vs. South Plains Financial | First Community vs. Southern California Bancorp | First Community vs. Southern Missouri Bancorp |
| Webster Financial vs. First Horizon National | Webster Financial vs. Grupo Financiero Galicia | Webster Financial vs. Comerica Incorporated | Webster Financial vs. SouthState |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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