Correlation Between Zions Bancorporation and First Merchants
Can any of the company-specific risk be diversified away by investing in both Zions Bancorporation and First Merchants 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 Zions Bancorporation and First Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Zions Bancorporation and First Merchants, you can compare the effects of market volatilities on Zions Bancorporation and First Merchants 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 Zions Bancorporation with a short position of First Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zions Bancorporation and First Merchants.
Diversification Opportunities for Zions Bancorporation and First Merchants
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Zions and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and First Merchants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Merchants and Zions Bancorporation 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 Zions Bancorporation are associated (or correlated) with First Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Merchants has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and First Merchants go up and down completely randomly.
Pair Corralation between Zions Bancorporation and First Merchants
Given the investment horizon of 90 days Zions Bancorporation is expected to generate 3.17 times more return on investment than First Merchants. However, Zions Bancorporation is 3.17 times more volatile than First Merchants. It trades about 0.09 of its potential returns per unit of risk. First Merchants is currently generating about 0.07 per unit of risk. If you would invest 3,697 in Zions Bancorporation on August 27, 2024 and sell it today you would earn a total of 2,361 from holding Zions Bancorporation or generate 63.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Zions Bancorp. vs. First Merchants
Performance |
| Timeline |
| Zions Bancorporation |
| First Merchants |
Zions Bancorporation and First Merchants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Zions Bancorporation and First Merchants
The main advantage of trading using opposite Zions Bancorporation and First Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zions Bancorporation position performs unexpectedly, First Merchants 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 First Merchants will offset losses from the drop in First Merchants' long position.| Zions Bancorporation vs. KeyCorp | Zions Bancorporation vs. Comerica | Zions Bancorporation vs. First Horizon National | Zions Bancorporation vs. Western Alliance Bancorporation |
| First Merchants vs. Fifth Third Bancorp | First Merchants vs. Zions Bancorporation | First Merchants vs. Huntington Bancshares Incorporated | First Merchants vs. PNC Financial Services |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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