Correlation Between Zions Bancorporation and BancFirst

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

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

Diversification Opportunities for Zions Bancorporation and BancFirst

0.97

Correlation Coefficient

Zions Bancorporation  BancFirst

Almost no diversification

The 3 months correlation between Zions and BancFirst is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst and Zions Bancorporation 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 Zions Bancorporation are associated (or correlated) with BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and BancFirst go up and down completely randomly.

Pair Corralation between Zions Bancorporation and BancFirst

Given the investment horizon of 90 days Zions Bancorporation is expected to under-perform the BancFirst. But the stock apears to be less risky and, when comparing its historical volatility, Zions Bancorporation is 1.16 times less risky than BancFirst. The stock trades about -0.15 of its potential returns per unit of risk. The BancFirst is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  12,292  in BancFirst on September 15, 2024 and sell it today you would earn a total of  246.00  from holding BancFirst or generate 2.0% return on investment over 90 days.

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

Zions Bancorp.  vs.  BancFirst

Zions Bancorporation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Zions Bancorporation displayed solid returns over the last few months and may actually be approaching a breakup point.

BancFirst

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BancFirst are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, BancFirst reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zions Bancorporation and BancFirst

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

The idea behind Zions Bancorporation and BancFirst 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.