Correlation Between Zions Bancorporation and Truist Financial

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

Diversification Opportunities for Zions Bancorporation and Truist Financial

0.94

Correlation Coefficient

Zions Bancorporation  Truist Financial

Almost no diversification

The 3 months correlation between Zions and Truist is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. and Truist Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truist Financial Corp 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 Truist Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truist Financial Corp has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and Truist Financial go up and down completely randomly.

Pair Corralation between Zions Bancorporation and Truist Financial

Given the investment horizon of 90 days Zions Bancorporation is expected to generate 1.44 times more return on investment than Truist Financial. However, Zions Bancorporation is 1.44 times more volatile than Truist Financial Corp. It trades about 0.13 of its potential returns per unit of risk. Truist Financial Corp is currently generating about 0.08 per unit of risk. If you would invest  4,921  in Zions Bancorporation on August 30, 2024 and sell it today you would earn a total of  1,147  from holding Zions Bancorporation or generate 23.31% 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.  Truist Financial Corp

Zions Bancorporation

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zions Bancorporation are ranked lower than 10 (%) 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.

Truist Financial Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Truist Financial Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Truist Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Zions Bancorporation and Truist Financial

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

The idea behind Zions Bancorporation and Truist Financial Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.