Correlation Between United Bankshares and UMB Financial
Can any of the company-specific risk be diversified away by investing in both United Bankshares 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 United Bankshares and UMB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Bankshares and UMB Financial, you can compare the effects of market volatilities on United Bankshares 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 United Bankshares with a short position of UMB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Bankshares and UMB Financial.
Diversification Opportunities for United Bankshares and UMB Financial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between United and UMB is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding United Bankshares and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and United Bankshares 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 United Bankshares 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 United Bankshares i.e., United Bankshares and UMB Financial go up and down completely randomly.
Pair Corralation between United Bankshares and UMB Financial
Given the investment horizon of 90 days United Bankshares is expected to generate 1.39 times less return on investment than UMB Financial. But when comparing it to its historical volatility, United Bankshares is 1.05 times less risky than UMB Financial. It trades about 0.19 of its potential returns per unit of risk. UMB Financial is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,705 in UMB Financial on August 28, 2024 and sell it today you would earn a total of 2,055 from holding UMB Financial or generate 19.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Bankshares vs. UMB Financial
Performance |
| Timeline |
| United Bankshares |
| UMB Financial |
United Bankshares and UMB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Bankshares and UMB Financial
The main advantage of trading using opposite United Bankshares and UMB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Bankshares 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.| United Bankshares vs. Peoples Bancorp | United Bankshares vs. Eagle Bancorp | United Bankshares vs. Northrim BanCorp | United Bankshares vs. Pacific Premier Bancorp |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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