Correlation Between Territorial Bancorp and Zions Bancorporation

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

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

Diversification Opportunities for Territorial Bancorp and Zions Bancorporation

0.65

Correlation Coefficient

Territorial Bancorp  Zions Bancorporation

Poor diversification

The 3 months correlation between Territorial and Zions is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Zions Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and Territorial Bancorp 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 Territorial Bancorp 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 Territorial Bancorp i.e., Territorial Bancorp and Zions Bancorporation go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Zions Bancorporation

Given the investment horizon of 90 days Territorial Bancorp is expected to under-perform the Zions Bancorporation. In addition to that, Territorial Bancorp is 1.0 times more volatile than Zions Bancorporation. It trades about -0.13 of its total potential returns per unit of risk. Zions Bancorporation is currently generating about -0.07 per unit of volatility. If you would invest  5,390  in Zions Bancorporation on December 30, 2024 and sell it today you would lose (443.00) from holding Zions Bancorporation or give up 8.22% of portfolio value over 90 days.

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

Territorial Bancorp  vs.  Zions Bancorp.

Territorial Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Territorial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 latest abnormal performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Territorial Bancorp and Zions Bancorporation

The main advantage of trading using opposite Territorial Bancorp and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Territorial Bancorp 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 Territorial Bancorp 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.