Correlation Between Zions Bancorporation and Valley National

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

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

Diversification Opportunities for Zions Bancorporation and Valley National

-0.44

Correlation Coefficient

Zions Bancorporation  Valley National

Very good diversification

The 3 months correlation between Zions and Valley is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. NA and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National 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 NA are associated (or correlated) with Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and Valley National go up and down completely randomly.

Pair Corralation between Zions Bancorporation and Valley National

Assuming the 90 days horizon Zions Bancorporation is expected to generate 2.29 times less return on investment than Valley National. But when comparing it to its historical volatility, Zions Bancorporation NA is 17.82 times less risky than Valley National. It trades about 0.2 of its potential returns per unit of risk. Valley National Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,471  in Valley National Bancorp on October 13, 2024 and sell it today you would earn a total of  9.00  from holding Valley National Bancorp or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	21.05%
Values	Daily Returns

Zions Bancorp. NA  vs.  Valley National Bancorp

Zions Bancorporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zions Bancorporation NA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Zions Bancorporation is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Valley National Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valley National Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Valley National is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Zions Bancorporation and Valley National

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

The idea behind Zions Bancorporation NA and Valley National 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.