Correlation Between Bank Negara and Umpqua Holdings

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

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

Diversification Opportunities for Bank Negara and Umpqua Holdings

-0.47

Correlation Coefficient

Bank Negara  Umpqua Holdings

Very good diversification

The 3 months correlation between Bank and Umpqua is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank Negara Indonesia and Umpqua Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umpqua Holdings and Bank Negara 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 Bank Negara Indonesia 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 Bank Negara i.e., Bank Negara and Umpqua Holdings go up and down completely randomly.

Pair Corralation between Bank Negara and Umpqua Holdings

Assuming the 90 days horizon Bank Negara Indonesia is expected to generate 5.15 times more return on investment than Umpqua Holdings. However, Bank Negara is 5.15 times more volatile than Umpqua Holdings. It trades about 0.02 of its potential returns per unit of risk. Umpqua Holdings is currently generating about -0.27 per unit of risk. If you would invest  1,560  in Bank Negara Indonesia on October 23, 2024 and sell it today you would lose (170.00) from holding Bank Negara Indonesia or give up 10.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.25%
Values	Daily Returns

Bank Negara Indonesia  vs.  Umpqua Holdings

Bank Negara Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Negara Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank Negara and Umpqua Holdings

The main advantage of trading using opposite Bank Negara and Umpqua Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank Negara 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 Bank Negara Indonesia 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.