Correlation Between Zions Bancorporation and First Financial

Can any of the company-specific risk be diversified away by investing in both Zions Bancorporation and First 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 First 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 First Financial Bancorp, you can compare the effects of market volatilities on Zions Bancorporation and First 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 First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zions Bancorporation and First Financial.

Diversification Opportunities for Zions Bancorporation and First Financial

0.96

Correlation Coefficient

Zions Bancorporation  First Financial

Almost no diversification

The 3 months correlation between Zions and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial 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 are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and First Financial go up and down completely randomly.

Pair Corralation between Zions Bancorporation and First Financial

Given the investment horizon of 90 days Zions Bancorporation is expected to generate 1.04 times more return on investment than First Financial. However, Zions Bancorporation is 1.04 times more volatile than First Financial Bancorp. It trades about 0.16 of its potential returns per unit of risk. First Financial Bancorp is currently generating about 0.11 per unit of risk. If you would invest  4,616  in Zions Bancorporation on September 13, 2024 and sell it today you would earn a total of  1,265  from holding Zions Bancorporation or generate 27.4% return on investment over 90 days.

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

Zions Bancorp.  vs.  First Financial Bancorp

Zions Bancorporation

Risk-Adjusted Performance

12 of 100

Good

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

First Financial Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental drivers, First Financial exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Zions Bancorporation and First Financial

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

The idea behind Zions Bancorporation and First Financial 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.