Correlation Between Absa Group and Zions Bancorporation

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

By analyzing existing cross correlation between Absa Group Limited and Zions Bancorporation, you can compare the effects of market volatilities on Absa Group and Zions Bancorporation 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 Absa Group with a short position of Zions Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absa Group and Zions Bancorporation.

Diversification Opportunities for Absa Group and Zions Bancorporation

0.38

Correlation Coefficient

Absa Group  Zions Bancorporation

Weak diversification

The 3 months correlation between Absa and Zions is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Absa Group Limited and Zions Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zions Bancorporation and Absa Group 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 Absa Group Limited are associated (or correlated) with Zions Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zions Bancorporation has no effect on the direction of Absa Group i.e., Absa Group and Zions Bancorporation go up and down completely randomly.

Pair Corralation between Absa Group and Zions Bancorporation

Assuming the 90 days horizon Absa Group is expected to generate 4.92 times less return on investment than Zions Bancorporation. But when comparing it to its historical volatility, Absa Group Limited is 4.33 times less risky than Zions Bancorporation. It trades about 0.12 of its potential returns per unit of risk. Zions Bancorporation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4,829  in Zions Bancorporation on September 3, 2024 and sell it today you would earn a total of  1,223  from holding Zions Bancorporation or generate 25.33% return on investment over 90 days.

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

Absa Group Limited  vs.  Zions Bancorp.

Absa Group Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Absa Group Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Absa Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Zions Bancorporation

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Zions Bancorporation displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Absa Group and Zions Bancorporation

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

The idea behind Absa Group Limited and Zions 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.