Correlation Between KeyCorp and First National

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

By analyzing existing cross correlation between KeyCorp and First National Corp, you can compare the effects of market volatilities on KeyCorp and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and First National.

Diversification Opportunities for KeyCorp and First National

-0.45

Correlation Coefficient

KeyCorp  First National

Very good diversification

The 3 months correlation between KeyCorp and First is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and First National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Corp 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Corp has no effect on the direction of KeyCorp i.e., KeyCorp and First National go up and down completely randomly.

Pair Corralation between KeyCorp and First National

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the First National. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.52 times less risky than First National. The preferred stock trades about -0.31 of its potential returns per unit of risk. The First National Corp is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,482  in First National Corp on September 29, 2024 and sell it today you would lose (77.00) from holding First National Corp or give up 3.1% of portfolio value over 90 days.

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

KeyCorp  vs.  First National Corp

KeyCorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

First National Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First National Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, First National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KeyCorp and First National

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

The idea behind KeyCorp and First National 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.