Correlation Between Capri Holdings and UMB Financial

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

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

Diversification Opportunities for Capri Holdings and UMB Financial

-0.72

Correlation Coefficient

Capri Holdings  UMB Financial

Pay attention - limited upside

The 3 months correlation between Capri and UMB is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and UMB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMB Financial and Capri Holdings 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 Capri Holdings 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 Capri Holdings i.e., Capri Holdings and UMB Financial go up and down completely randomly.

Pair Corralation between Capri Holdings and UMB Financial

Given the investment horizon of 90 days Capri Holdings is expected to under-perform the UMB Financial. In addition to that, Capri Holdings is 2.94 times more volatile than UMB Financial. It trades about -0.05 of its total potential returns per unit of risk. UMB Financial is currently generating about 0.15 per unit of volatility. If you would invest  10,346  in UMB Financial on August 31, 2024 and sell it today you would earn a total of  2,259  from holding UMB Financial or generate 21.83% return on investment over 90 days.

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

Capri Holdings  vs.  UMB Financial

Capri Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capri Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

UMB Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UMB Financial are ranked lower than 11 (%) 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 Capri Holdings and UMB Financial

The main advantage of trading using opposite Capri Holdings and UMB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capri Holdings 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 Capri Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..