Correlation Between UMB Financial and Bayfirst Financial

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

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

Diversification Opportunities for UMB Financial and Bayfirst Financial

0.2

Correlation Coefficient

UMB Financial  Bayfirst Financial

Modest diversification

The 3 months correlation between UMB and Bayfirst is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding UMB Financial and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp and UMB 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 UMB Financial are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of UMB Financial i.e., UMB Financial and Bayfirst Financial go up and down completely randomly.

Pair Corralation between UMB Financial and Bayfirst Financial

Given the investment horizon of 90 days UMB Financial is expected to generate 1.08 times more return on investment than Bayfirst Financial. However, UMB Financial is 1.08 times more volatile than Bayfirst Financial Corp. It trades about 0.17 of its potential returns per unit of risk. Bayfirst Financial Corp is currently generating about 0.07 per unit of risk. If you would invest  7,904  in UMB Financial on September 19, 2024 and sell it today you would earn a total of  4,122  from holding UMB Financial or generate 52.15% return on investment over 90 days.

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

UMB Financial  vs.  Bayfirst Financial Corp

UMB Financial

Risk-Adjusted Performance

6 of 100

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 fragile fundamental drivers, UMB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bayfirst Financial Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Bayfirst Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UMB Financial and Bayfirst Financial

The main advantage of trading using opposite UMB Financial and Bayfirst Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UMB Financial position performs unexpectedly, Bayfirst 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 Bayfirst Financial will offset losses from the drop in Bayfirst Financial's long position.

The idea behind UMB Financial and Bayfirst Financial Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.