Correlation Between Truist Financial and Zions Bancorporation

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

Diversification Opportunities for Truist Financial and Zions Bancorporation

0.65

Correlation Coefficient

Truist Financial  Zions Bancorporation

Poor diversification

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

Pair Corralation between Truist Financial and Zions Bancorporation

Assuming the 90 days trading horizon Truist Financial is expected to generate 0.46 times more return on investment than Zions Bancorporation. However, Truist Financial is 2.15 times less risky than Zions Bancorporation. It trades about -0.07 of its potential returns per unit of risk. Zions Bancorporation is currently generating about -0.24 per unit of risk. If you would invest  2,266  in Truist Financial on November 28, 2024 and sell it today you would lose (24.00) from holding Truist Financial or give up 1.06% of portfolio value over 90 days.

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

Truist Financial  vs.  Zions Bancorp.

Truist Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Truist Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Truist Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Truist Financial and Zions Bancorporation

The main advantage of trading using opposite Truist Financial and Zions Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Truist 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 Truist Financial 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.