Correlation Between Visa and UMB Financial
Can any of the company-specific risk be diversified away by investing in both Visa and UMB 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 Visa and UMB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and UMB Financial, you can compare the effects of market volatilities on Visa and UMB 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 Visa with a short position of UMB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and UMB Financial.
Diversification Opportunities for Visa and UMB Financial
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Visa and UMB is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and Visa 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 Visa Class A are associated (or correlated) with UMB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMB Financial has no effect on the direction of Visa i.e., Visa and UMB Financial go up and down completely randomly.
Pair Corralation between Visa and UMB Financial
Taking into account the 90-day investment horizon Visa Class A is expected to generate 0.54 times more return on investment than UMB Financial. However, Visa Class A is 1.85 times less risky than UMB Financial. It trades about 0.07 of its potential returns per unit of risk. UMB Financial is currently generating about 0.01 per unit of risk. If you would invest 19,000 in Visa Class A on January 28, 2024 and sell it today you would earn a total of 8,452 from holding Visa Class A or generate 44.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Visa Class A vs. UMB Financial
Performance |
Timeline |
Visa Class A |
UMB Financial |
Visa and UMB Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Visa and UMB Financial
The main advantage of trading using opposite Visa and UMB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa position performs unexpectedly, UMB 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 UMB Financial will offset losses from the drop in UMB Financial's long position.Visa vs. American Express | Visa vs. Capital One Financial | Visa vs. Upstart HoldingsInc | Visa vs. Ally Financial |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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