Correlation Between Zions Bancorporation and Northrim BanCorp

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

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

Diversification Opportunities for Zions Bancorporation and Northrim BanCorp

0.67

Correlation Coefficient

Zions Bancorporation  Northrim BanCorp

Poor diversification

The 3 months correlation between Zions and Northrim is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and Northrim BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northrim BanCorp 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 Northrim BanCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northrim BanCorp has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and Northrim BanCorp go up and down completely randomly.

Pair Corralation between Zions Bancorporation and Northrim BanCorp

Given the investment horizon of 90 days Zions Bancorporation is expected to under-perform the Northrim BanCorp. But the stock apears to be less risky and, when comparing its historical volatility, Zions Bancorporation is 1.11 times less risky than Northrim BanCorp. The stock trades about -0.07 of its potential returns per unit of risk. The Northrim BanCorp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  7,745  in Northrim BanCorp on December 22, 2024 and sell it today you would lose (393.00) from holding Northrim BanCorp or give up 5.07% of portfolio value over 90 days.

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

Zions Bancorp.  vs.  Northrim BanCorp

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.

Northrim BanCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Northrim BanCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Northrim BanCorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Zions Bancorporation and Northrim BanCorp

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

The idea behind Zions Bancorporation and Northrim BanCorp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.