Correlation Between Cars and Umpqua Holdings

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

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

Diversification Opportunities for Cars and Umpqua Holdings

-0.11

Correlation Coefficient

Cars  Umpqua Holdings

Good diversification

The 3 months correlation between Cars and Umpqua is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cars Inc and Umpqua Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umpqua Holdings and Cars 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 Cars Inc are associated (or correlated) with Umpqua Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umpqua Holdings has no effect on the direction of Cars i.e., Cars and Umpqua Holdings go up and down completely randomly.

Pair Corralation between Cars and Umpqua Holdings

Given the investment horizon of 90 days Cars is expected to generate 5.18 times less return on investment than Umpqua Holdings. In addition to that, Cars is 1.51 times more volatile than Umpqua Holdings. It trades about 0.02 of its total potential returns per unit of risk. Umpqua Holdings is currently generating about 0.13 per unit of volatility. If you would invest  1,676  in Umpqua Holdings on October 11, 2024 and sell it today you would earn a total of  90.00  from holding Umpqua Holdings or generate 5.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.86%
Values	Daily Returns

Cars Inc  vs.  Umpqua Holdings

Cars Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cars Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, Cars may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Umpqua Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umpqua Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Umpqua Holdings is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cars and Umpqua Holdings

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

The idea behind Cars Inc and Umpqua Holdings 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.