Correlation Between First Community and Zions Bancorporation

Can any of the company-specific risk be diversified away by investing in both First Community 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 Community 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 Community Bancshares and Zions Bancorporation, you can compare the effects of market volatilities on First Community 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 Community with a short position of Zions Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Zions Bancorporation.

Diversification Opportunities for First Community and Zions Bancorporation

0.84

Correlation Coefficient

First Community  Zions Bancorporation

Very poor diversification

The 3 months correlation between First and Zions is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding First Community Bancshares and Zions Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and First Community 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 Community Bancshares 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 Community i.e., First Community and Zions Bancorporation go up and down completely randomly.

Pair Corralation between First Community and Zions Bancorporation

Given the investment horizon of 90 days First Community Bancshares is expected to generate 1.13 times more return on investment than Zions Bancorporation. However, First Community is 1.13 times more volatile than Zions Bancorporation. It trades about -0.2 of its potential returns per unit of risk. Zions Bancorporation is currently generating about -0.32 per unit of risk. If you would invest  4,521  in First Community Bancshares on September 21, 2024 and sell it today you would lose (357.00) from holding First Community Bancshares or give up 7.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

First Community Bancshares  vs.  Zions Bancorp.

First Community Banc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Zions Bancorporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Zions Bancorporation displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Community and Zions Bancorporation

The main advantage of trading using opposite First Community and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community 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 First Community Bancshares and Zions Bancorporation 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.