Correlation Between ZENITH BANK and UNITED BANK

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

By analyzing existing cross correlation between ZENITH BANK PLC and UNITED BANK FOR, you can compare the effects of market volatilities on ZENITH BANK and UNITED BANK 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 ZENITH BANK with a short position of UNITED BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZENITH BANK and UNITED BANK.

Diversification Opportunities for ZENITH BANK and UNITED BANK

0.96

Correlation Coefficient

ZENITH BANK  UNITED BANK

Almost no diversification

The 3 months correlation between ZENITH and UNITED is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding ZENITH BANK PLC and UNITED BANK FOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED BANK FOR and ZENITH BANK 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 ZENITH BANK PLC are associated (or correlated) with UNITED BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITED BANK FOR has no effect on the direction of ZENITH BANK i.e., ZENITH BANK and UNITED BANK go up and down completely randomly.

Pair Corralation between ZENITH BANK and UNITED BANK

Assuming the 90 days trading horizon ZENITH BANK is expected to generate 1.57 times less return on investment than UNITED BANK. But when comparing it to its historical volatility, ZENITH BANK PLC is 1.13 times less risky than UNITED BANK. It trades about 0.1 of its potential returns per unit of risk. UNITED BANK FOR is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,270  in UNITED BANK FOR on November 29, 2024 and sell it today you would earn a total of  420.00  from holding UNITED BANK FOR or generate 12.84% return on investment over 90 days.

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

ZENITH BANK PLC  vs.  UNITED BANK FOR

ZENITH BANK PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZENITH BANK PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, ZENITH BANK may actually be approaching a critical reversion point that can send shares even higher in March 2025.

UNITED BANK FOR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED BANK FOR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, UNITED BANK unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ZENITH BANK and UNITED BANK

The main advantage of trading using opposite ZENITH BANK and UNITED BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZENITH BANK position performs unexpectedly, UNITED BANK 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 UNITED BANK will offset losses from the drop in UNITED BANK's long position.

The idea behind ZENITH BANK PLC and UNITED BANK FOR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.