Correlation Between Umpqua Holdings and Albertsons Companies

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

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

Diversification Opportunities for Umpqua Holdings and Albertsons Companies

0.09

Correlation Coefficient

Umpqua Holdings  Albertsons Companies

Significant diversification

The 3 months correlation between Umpqua and Albertsons is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Umpqua Holdings and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies and Umpqua 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 Umpqua Holdings are associated (or correlated) with Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Umpqua Holdings i.e., Umpqua Holdings and Albertsons Companies go up and down completely randomly.

Pair Corralation between Umpqua Holdings and Albertsons Companies

Given the investment horizon of 90 days Umpqua Holdings is expected to under-perform the Albertsons Companies. But the stock apears to be less risky and, when comparing its historical volatility, Umpqua Holdings is 1.46 times less risky than Albertsons Companies. The stock trades about -0.66 of its potential returns per unit of risk. The Albertsons Companies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,061  in Albertsons Companies on October 10, 2024 and sell it today you would lose (89.00) from holding Albertsons Companies or give up 4.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

Umpqua Holdings  vs.  Albertsons Companies

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.

Albertsons Companies

Risk-Adjusted Performance

7 of 100

Modest

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

Pair Trading with Umpqua Holdings and Albertsons Companies

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

The idea behind Umpqua Holdings and Albertsons Companies 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.