Correlation Between Citigroup and UMB Financial

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

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

Diversification Opportunities for Citigroup and UMB Financial

0.73

Correlation Coefficient

Citigroup  UMB Financial

Poor diversification

The 3 months correlation between Citigroup and UMB is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and UMB Financial go up and down completely randomly.

Pair Corralation between Citigroup and UMB Financial

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.19 times more return on investment than UMB Financial. However, Citigroup is 1.19 times more volatile than UMB Financial. It trades about 0.03 of its potential returns per unit of risk. UMB Financial is currently generating about -0.09 per unit of risk. If you would invest  6,991  in Citigroup on December 28, 2024 and sell it today you would earn a total of  194.00  from holding Citigroup or generate 2.77% return on investment over 90 days.

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

Citigroup  vs.  UMB Financial

Citigroup

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Citigroup is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

UMB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days UMB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Citigroup and UMB Financial

The main advantage of trading using opposite Citigroup and UMB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.