Correlation Between International Bancshares and KeyCorp

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

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

Diversification Opportunities for International Bancshares and KeyCorp

0.97

Correlation Coefficient

International Bancshares  KeyCorp

Almost no diversification

The 3 months correlation between International and KeyCorp is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and International Bancshares 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 International Bancshares are associated (or correlated) with KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of International Bancshares i.e., International Bancshares and KeyCorp go up and down completely randomly.

Pair Corralation between International Bancshares and KeyCorp

Given the investment horizon of 90 days International Bancshares is expected to under-perform the KeyCorp. In addition to that, International Bancshares is 1.43 times more volatile than KeyCorp. It trades about -0.12 of its total potential returns per unit of risk. KeyCorp is currently generating about -0.17 per unit of volatility. If you would invest  1,904  in KeyCorp on September 12, 2024 and sell it today you would lose (63.00) from holding KeyCorp or give up 3.31% of portfolio value over 90 days.

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

International Bancshares  vs.  KeyCorp

International Bancshares

Risk-Adjusted Performance

8 of 100

OK

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

KeyCorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, KeyCorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Bancshares and KeyCorp

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

The idea behind International Bancshares and KeyCorp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.