Correlation Between Zions Bancorporation and PNC Financial

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

By analyzing existing cross correlation between Zions Bancorporation and PNC Financial Services, you can compare the effects of market volatilities on Zions Bancorporation and PNC Financial 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 PNC Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zions Bancorporation and PNC Financial.

Diversification Opportunities for Zions Bancorporation and PNC Financial

0.86

Correlation Coefficient

Zions Bancorporation  PNC Financial

Very poor diversification

The 3 months correlation between Zions and PNC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and PNC Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial Services 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial Services has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and PNC Financial go up and down completely randomly.

Pair Corralation between Zions Bancorporation and PNC Financial

Given the investment horizon of 90 days Zions Bancorporation is expected to generate 1.36 times more return on investment than PNC Financial. However, Zions Bancorporation is 1.36 times more volatile than PNC Financial Services. It trades about 0.11 of its potential returns per unit of risk. PNC Financial Services is currently generating about 0.02 per unit of risk. If you would invest  4,172  in Zions Bancorporation on February 4, 2024 and sell it today you would earn a total of  190.00  from holding Zions Bancorporation or generate 4.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Zions Bancorp.  vs.  PNC Financial Services

Zions Bancorporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Zions Bancorporation displayed solid returns over the last few months and may actually be approaching a breakup point.

PNC Financial Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PNC Financial Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, PNC Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Zions Bancorporation and PNC Financial

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

The idea behind Zions Bancorporation and PNC Financial Services 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..