Correlation Between Zions Bancorporation and PNC Financial

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

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

Diversification Opportunities for Zions Bancorporation and PNC Financial

0.97

Correlation Coefficient

Zions Bancorporation  PNC Financial

Almost no diversification

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

Pair Corralation between Zions Bancorporation and PNC Financial

Given the investment horizon of 90 days Zions Bancorporation is expected to generate 1.26 times more return on investment than PNC Financial. However, Zions Bancorporation is 1.26 times more volatile than PNC Financial Services. It trades about -0.06 of its potential returns per unit of risk. PNC Financial Services is currently generating about -0.09 per unit of risk. If you would invest  5,390  in Zions Bancorporation on December 28, 2024 and sell it today you would lose (364.00) from holding Zions Bancorporation or give up 6.75% of portfolio value over 90 days.

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

Zions Bancorp.  vs.  PNC Financial Services

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.

PNC Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNC Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Zions Bancorporation and PNC Financial

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

The idea behind Zions Bancorporation and PNC Financial Services 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.