Correlation Between Zions Bancorporation and Capital One

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

Diversification Opportunities for Zions Bancorporation and Capital One

0.6

Correlation Coefficient

Zions Bancorporation  Capital One

Poor diversification

The 3 months correlation between Zions and Capital is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Zions Bancorp. National and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial 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 Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Zions Bancorporation i.e., Zions Bancorporation and Capital One go up and down completely randomly.

Pair Corralation between Zions Bancorporation and Capital One

Assuming the 90 days horizon Zions Bancorporation National is expected to generate 0.77 times more return on investment than Capital One. However, Zions Bancorporation National is 1.3 times less risky than Capital One. It trades about -0.02 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.1 per unit of risk. If you would invest  2,526  in Zions Bancorporation National on September 16, 2024 and sell it today you would lose (25.00) from holding Zions Bancorporation National or give up 0.99% of portfolio value over 90 days.

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

Zions Bancorp. National  vs.  Capital One Financial

Zions Bancorporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zions Bancorporation National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Zions Bancorporation is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Capital One Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Zions Bancorporation and Capital One

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

The idea behind Zions Bancorporation National and Capital One Financial 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.