Correlation Between Zions Bancorporation and Western Alliance

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

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

Diversification Opportunities for Zions Bancorporation and Western Alliance

0.86

Correlation Coefficient

Zions Bancorporation  Western Alliance

Very poor diversification

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

Pair Corralation between Zions Bancorporation and Western Alliance

Given the investment horizon of 90 days Zions Bancorporation is expected to under-perform the Western Alliance. But the stock apears to be less risky and, when comparing its historical volatility, Zions Bancorporation is 1.4 times less risky than Western Alliance. The stock trades about -0.07 of its potential returns per unit of risk. The Western Alliance Bancorporation is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  8,321  in Western Alliance Bancorporation on December 28, 2024 and sell it today you would lose (709.00) from holding Western Alliance Bancorporation or give up 8.52% of portfolio value over 90 days.

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

Zions Bancorp.  vs.  Western Alliance 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.

Western Alliance Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Alliance Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Zions Bancorporation and Western Alliance

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

The idea behind Zions Bancorporation and Western Alliance Bancorporation 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.