Correlation Between Enterprise Financial and UMB Financial

Can any of the company-specific risk be diversified away by investing in both Enterprise 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 Enterprise 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 Enterprise Financial Services and UMB Financial, you can compare the effects of market volatilities on Enterprise 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 Enterprise Financial with a short position of UMB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Financial and UMB Financial.

Diversification Opportunities for Enterprise Financial and UMB Financial

0.98

Correlation Coefficient

Enterprise Financial  UMB Financial

Almost no diversification

The 3 months correlation between Enterprise and UMB is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Financial Services and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and Enterprise 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 Enterprise Financial Services 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 Enterprise Financial i.e., Enterprise Financial and UMB Financial go up and down completely randomly.

Pair Corralation between Enterprise Financial and UMB Financial

Given the investment horizon of 90 days Enterprise Financial is expected to generate 1.01 times less return on investment than UMB Financial. In addition to that, Enterprise Financial is 1.06 times more volatile than UMB Financial. It trades about 0.11 of its total potential returns per unit of risk. UMB Financial is currently generating about 0.12 per unit of volatility. If you would invest  10,478  in UMB Financial on September 13, 2024 and sell it today you would earn a total of  1,758  from holding UMB Financial or generate 16.78% return on investment over 90 days.

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

Enterprise Financial Services  vs.  UMB Financial

Enterprise Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Financial Services are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Enterprise Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

UMB Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UMB Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, UMB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Financial and UMB Financial

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

The idea behind Enterprise Financial Services 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.

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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.