Correlation Between Zions Bancorporation and Titan Machinery

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

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

Diversification Opportunities for Zions Bancorporation and Titan Machinery

0.86

Correlation Coefficient

Zions Bancorporation  Titan Machinery

Very poor diversification

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

Pair Corralation between Zions Bancorporation and Titan Machinery

Assuming the 90 days horizon Zions Bancorporation National is expected to generate 0.88 times more return on investment than Titan Machinery. However, Zions Bancorporation National is 1.14 times less risky than Titan Machinery. It trades about 0.15 of its potential returns per unit of risk. Titan Machinery is currently generating about 0.01 per unit of risk. If you would invest  4,097  in Zions Bancorporation National on September 29, 2024 and sell it today you would earn a total of  1,052  from holding Zions Bancorporation National or generate 25.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Zions Bancorp. National  vs.  Titan Machinery

Zions Bancorporation

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation National are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zions Bancorporation reported solid returns over the last few months and may actually be approaching a breakup point.

Titan Machinery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Titan Machinery is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Zions Bancorporation and Titan Machinery

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

The idea behind Zions Bancorporation National and Titan Machinery 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.