Correlation Between KeyCorp and AvalonBay Communities
Can any of the company-specific risk be diversified away by investing in both KeyCorp and AvalonBay Communities 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 KeyCorp and AvalonBay Communities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KeyCorp and AvalonBay Communities, you can compare the effects of market volatilities on KeyCorp and AvalonBay Communities 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 KeyCorp with a short position of AvalonBay Communities. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and AvalonBay Communities.
Diversification Opportunities for KeyCorp and AvalonBay Communities
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KeyCorp and AvalonBay is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and AvalonBay Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AvalonBay Communities and KeyCorp 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 KeyCorp are associated (or correlated) with AvalonBay Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AvalonBay Communities has no effect on the direction of KeyCorp i.e., KeyCorp and AvalonBay Communities go up and down completely randomly.
Pair Corralation between KeyCorp and AvalonBay Communities
Assuming the 90 days trading horizon KeyCorp is expected to under-perform the AvalonBay Communities. But the stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.27 times less risky than AvalonBay Communities. The stock trades about -0.15 of its potential returns per unit of risk. The AvalonBay Communities is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 33,935 in AvalonBay Communities on September 25, 2024 and sell it today you would lose (11.00) from holding AvalonBay Communities or give up 0.03% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
KeyCorp vs. AvalonBay Communities
Performance |
Timeline |
KeyCorp |
AvalonBay Communities |
KeyCorp and AvalonBay Communities Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with KeyCorp and AvalonBay Communities
The main advantage of trading using opposite KeyCorp and AvalonBay Communities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KeyCorp position performs unexpectedly, AvalonBay Communities 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 AvalonBay Communities will offset losses from the drop in AvalonBay Communities' long position.KeyCorp vs. Banco Santander Chile | KeyCorp vs. Lloyds Banking Group | KeyCorp vs. Karsten SA | KeyCorp vs. Recrusul SA |
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Check out your portfolio center.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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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