Correlation Between First Financial and Zions Bancorporation
Can any of the company-specific risk be diversified away by investing in both First Financial and Zions Bancorporation 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 First Financial and Zions Bancorporation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bankshares and Zions Bancorporation, you can compare the effects of market volatilities on First Financial and Zions Bancorporation 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 First Financial with a short position of Zions Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Zions Bancorporation.
Diversification Opportunities for First Financial and Zions Bancorporation
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Zions is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Zions Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and First 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 First Financial Bankshares are associated (or correlated) with Zions Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zions Bancorporation has no effect on the direction of First Financial i.e., First Financial and Zions Bancorporation go up and down completely randomly.
Pair Corralation between First Financial and Zions Bancorporation
Given the investment horizon of 90 days First Financial is expected to generate 1.46 times less return on investment than Zions Bancorporation. But when comparing it to its historical volatility, First Financial Bankshares is 1.17 times less risky than Zions Bancorporation. It trades about 0.12 of its potential returns per unit of risk. Zions Bancorporation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,829 in Zions Bancorporation on August 31, 2024 and sell it today you would earn a total of 1,239 from holding Zions Bancorporation or generate 25.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bankshares vs. Zions Bancorp.
Performance |
| Timeline |
| First Financial Bank |
| Zions Bancorporation |
First Financial and Zions Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Zions Bancorporation
The main advantage of trading using opposite First Financial and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Zions Bancorporation 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 Zions Bancorporation will offset losses from the drop in Zions Bancorporation's long position.| First Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty Bancshares |
| Zions Bancorporation vs. KeyCorp | Zions Bancorporation vs. Comerica | Zions Bancorporation vs. First Horizon National | Zions Bancorporation vs. Western Alliance Bancorporation |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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