Correlation Between Zions Bancorporation and Grupo Financiero

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

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

Diversification Opportunities for Zions Bancorporation and Grupo Financiero

0.86

Correlation Coefficient

Zions Bancorporation  Grupo Financiero

Very poor diversification

The 3 months correlation between Zions and Grupo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and Grupo Financiero go up and down completely randomly.

Pair Corralation between Zions Bancorporation and Grupo Financiero

Given the investment horizon of 90 days Zions Bancorporation is expected to generate 1.43 times less return on investment than Grupo Financiero. In addition to that, Zions Bancorporation is 1.13 times more volatile than Grupo Financiero Galicia. It trades about 0.14 of its total potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.23 per unit of volatility. If you would invest  4,029  in Grupo Financiero Galicia on September 2, 2024 and sell it today you would earn a total of  1,615  from holding Grupo Financiero Galicia or generate 40.08% return on investment over 90 days.

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

Zions Bancorp.  vs.  Grupo Financiero Galicia

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 inconsistent basic indicators, Zions Bancorporation displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Financiero Galicia

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Grupo Financiero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zions Bancorporation and Grupo Financiero

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

The idea behind Zions Bancorporation and Grupo Financiero Galicia 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.