Correlation Between PNC Financial and Zions Bancorporation

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

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

Diversification Opportunities for PNC Financial and Zions Bancorporation

0.97

Correlation Coefficient

PNC Financial  Zions Bancorporation

Almost no diversification

The 3 months correlation between PNC and Zions is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding PNC Financial Services and Zions Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and PNC Financial 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 PNC Financial Services 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 PNC Financial i.e., PNC Financial and Zions Bancorporation go up and down completely randomly.

Pair Corralation between PNC Financial and Zions Bancorporation

Considering the 90-day investment horizon PNC Financial Services is expected to under-perform the Zions Bancorporation. But the stock apears to be less risky and, when comparing its historical volatility, PNC Financial Services is 1.26 times less risky than Zions Bancorporation. The stock trades about -0.09 of its potential returns per unit of risk. The Zions Bancorporation is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  5,426  in Zions Bancorporation on December 27, 2024 and sell it today you would lose (360.00) from holding Zions Bancorporation or give up 6.63% of portfolio value over 90 days.

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

PNC Financial Services  vs.  Zions Bancorp.

PNC Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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

Very Weak

Over the last 90 days Zions Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Zions Bancorporation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PNC Financial and Zions Bancorporation

The main advantage of trading using opposite PNC Financial and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNC Financial 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 PNC Financial Services 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.