Correlation Between UMB Financial and Hilltop Holdings

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

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

Diversification Opportunities for UMB Financial and Hilltop Holdings

-0.39

Correlation Coefficient

UMB Financial  Hilltop Holdings

Very good diversification

The 3 months correlation between UMB and Hilltop is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding UMB Financial and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings 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 Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of UMB Financial i.e., UMB Financial and Hilltop Holdings go up and down completely randomly.

Pair Corralation between UMB Financial and Hilltop Holdings

Given the investment horizon of 90 days UMB Financial is expected to under-perform the Hilltop Holdings. In addition to that, UMB Financial is 1.16 times more volatile than Hilltop Holdings. It trades about -0.1 of its total potential returns per unit of risk. Hilltop Holdings is currently generating about 0.09 per unit of volatility. If you would invest  2,873  in Hilltop Holdings on December 27, 2024 and sell it today you would earn a total of  229.00  from holding Hilltop Holdings or generate 7.97% return on investment over 90 days.

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

UMB Financial  vs.  Hilltop Holdings

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.

Hilltop Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hilltop Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Hilltop Holdings may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with UMB Financial and Hilltop Holdings

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

The idea behind UMB Financial and Hilltop 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.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.