Correlation Between Fast Retailing and Zions Bancorporation

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

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

Diversification Opportunities for Fast Retailing and Zions Bancorporation

0.24

Correlation Coefficient

Fast Retailing  Zions Bancorporation

Modest diversification

The 3 months correlation between Fast and Zions is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Zions Bancorp. National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Zions Bancorporation go up and down completely randomly.

Pair Corralation between Fast Retailing and Zions Bancorporation

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Zions Bancorporation. In addition to that, Fast Retailing is 1.3 times more volatile than Zions Bancorporation National. It trades about -0.22 of its total potential returns per unit of risk. Zions Bancorporation National is currently generating about -0.19 per unit of volatility. If you would invest  5,531  in Zions Bancorporation National on October 14, 2024 and sell it today you would lose (351.00) from holding Zions Bancorporation National or give up 6.35% of portfolio value over 90 days.

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

Fast Retailing Co  vs.  Zions Bancorp. National

Fast Retailing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Zions Bancorporation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation National are ranked lower than 8 (%) 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 Fast Retailing and Zions Bancorporation

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

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.