Correlation Between First Merchants and Zions Bancorporation
Can any of the company-specific risk be diversified away by investing in both First Merchants 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 Merchants 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 Merchants and Zions Bancorporation National, you can compare the effects of market volatilities on First Merchants 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 Merchants with a short position of Zions Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Merchants and Zions Bancorporation.
Diversification Opportunities for First Merchants and Zions Bancorporation
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Zions is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding First Merchants and Zions Bancorp. National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and First Merchants 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 Merchants 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 Merchants i.e., First Merchants and Zions Bancorporation go up and down completely randomly.
Pair Corralation between First Merchants and Zions Bancorporation
Assuming the 90 days horizon First Merchants is expected to generate 2.42 times less return on investment than Zions Bancorporation. But when comparing it to its historical volatility, First Merchants is 1.14 times less risky than Zions Bancorporation. It trades about 0.08 of its potential returns per unit of risk. Zions Bancorporation National is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,193 in Zions Bancorporation National on September 12, 2024 and sell it today you would earn a total of 139.00 from holding Zions Bancorporation National or generate 6.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Merchants vs. Zions Bancorp. National
Performance |
| Timeline |
| First Merchants |
| Zions Bancorporation |
First Merchants and Zions Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Merchants and Zions Bancorporation
The main advantage of trading using opposite First Merchants and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Merchants 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 Merchants vs. Heartland Financial USA | First Merchants vs. OceanFirst Financial Corp | First Merchants vs. Old National Bancorp |
| Zions Bancorporation vs. Zions Bancorporation National | Zions Bancorporation vs. Valley National Bancorp | Zions Bancorporation vs. Valley National Bancorp | Zions Bancorporation vs. Zions Bancorporation NA |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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