Correlation Between First Financial and UMB Financial
Can any of the company-specific risk be diversified away by investing in both First Financial 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 First Financial and UMB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bancorp and UMB Financial, you can compare the effects of market volatilities on First Financial 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 First Financial with a short position of UMB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and UMB Financial.
Diversification Opportunities for First Financial and UMB Financial
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and UMB is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and First 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 First Financial Bancorp 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 First Financial i.e., First Financial and UMB Financial go up and down completely randomly.
Pair Corralation between First Financial and UMB Financial
Given the investment horizon of 90 days First Financial is expected to generate 1.8 times less return on investment than UMB Financial. In addition to that, First Financial is 1.08 times more volatile than UMB Financial. It trades about 0.04 of its total potential returns per unit of risk. UMB Financial is currently generating about 0.08 per unit of volatility. If you would invest 10,313 in UMB Financial on November 2, 2024 and sell it today you would earn a total of 1,717 from holding UMB Financial or generate 16.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bancorp vs. UMB Financial
Performance |
| Timeline |
| First Financial Bancorp |
| UMB Financial |
First Financial and UMB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and UMB Financial
The main advantage of trading using opposite First Financial and UMB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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.| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
| UMB Financial vs. BOK Financial | UMB Financial vs. Community Bank System | UMB Financial vs. First Financial Bankshares | UMB Financial vs. Equity Bancshares, |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |