Correlation Between Ford and Zions Bancorporation

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

By analyzing existing cross correlation between Ford Motor and Zions Bancorporation National, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Zions Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Zions Bancorporation.

Diversification Opportunities for Ford and Zions Bancorporation

0.32

Correlation Coefficient

Ford  Zions Bancorporation

Weak diversification

The 3 months correlation between Ford and Zions is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Zions Bancorp. National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and Ford 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 Ford Motor 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 Ford i.e., Ford and Zions Bancorporation go up and down completely randomly.

Pair Corralation between Ford and Zions Bancorporation

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Zions Bancorporation. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.02 times less risky than Zions Bancorporation. The stock trades about -0.42 of its potential returns per unit of risk. The Zions Bancorporation National is currently generating about -0.34 of returns per unit of risk over similar time horizon. If you would invest  5,772  in Zions Bancorporation National on September 25, 2024 and sell it today you would lose (623.00) from holding Zions Bancorporation National or give up 10.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Ford Motor  vs.  Zions Bancorp. National

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ford is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Zions Bancorporation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation National are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Zions Bancorporation reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ford and Zions Bancorporation

The main advantage of trading using opposite Ford and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.

The idea behind Ford Motor and Zions Bancorporation National 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.