Correlation Between Financial Institutions and UMB Financial

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

By analyzing existing cross correlation between Financial Institutions and UMB Financial, you can compare the effects of market volatilities on Financial Institutions 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 Financial Institutions with a short position of UMB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Institutions and UMB Financial.

Diversification Opportunities for Financial Institutions and UMB Financial

0.78

Correlation Coefficient

Financial Institutions  UMB Financial

Poor diversification

The 3 months correlation between Financial and UMB is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Financial Institutions and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and Financial Institutions 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 Financial Institutions 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 Financial Institutions i.e., Financial Institutions and UMB Financial go up and down completely randomly.

Pair Corralation between Financial Institutions and UMB Financial

Given the investment horizon of 90 days Financial Institutions is expected to under-perform the UMB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Financial Institutions is 1.01 times less risky than UMB Financial. The stock trades about -0.03 of its potential returns per unit of risk. The UMB Financial is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  10,062  in UMB Financial on May 5, 2025 and sell it today you would earn a total of  777.00  from holding UMB Financial or generate 7.72% return on investment over 90 days.

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

Financial Institutions  vs.  UMB Financial

Financial Institutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days Financial Institutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Financial Institutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

UMB Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UMB Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, UMB Financial may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Financial Institutions and UMB Financial

The main advantage of trading using opposite Financial Institutions and UMB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Institutions 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.

The idea behind Financial Institutions and UMB Financial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.