Correlation Between Zions Bancorporation and National Capital

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

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

Diversification Opportunities for Zions Bancorporation and National Capital

-0.05

Correlation Coefficient

Zions Bancorporation  National Capital

Good diversification

The 3 months correlation between Zions and National is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank 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 National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and National Capital go up and down completely randomly.

Pair Corralation between Zions Bancorporation and National Capital

Given the investment horizon of 90 days Zions Bancorporation is expected to under-perform the National Capital. But the stock apears to be less risky and, when comparing its historical volatility, Zions Bancorporation is 1.68 times less risky than National Capital. The stock trades about -0.07 of its potential returns per unit of risk. The National Capital Bank is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  7,500  in National Capital Bank on December 21, 2024 and sell it today you would lose (700.00) from holding National Capital Bank or give up 9.33% of portfolio value over 90 days.

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

Zions Bancorp.  vs.  National Capital Bank

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.

National Capital Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zions Bancorporation and National Capital

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

The idea behind Zions Bancorporation and National Capital Bank 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.