Correlation Between KeyCorp and Voya Financial

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

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

Diversification Opportunities for KeyCorp and Voya Financial

0.5

Correlation Coefficient

KeyCorp  Voya Financial

Very weak diversification

The 3 months correlation between KeyCorp and Voya is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Voya Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Financial 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 Voya Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Financial has no effect on the direction of KeyCorp i.e., KeyCorp and Voya Financial go up and down completely randomly.

Pair Corralation between KeyCorp and Voya Financial

Assuming the 90 days trading horizon KeyCorp is expected to generate 6.67 times less return on investment than Voya Financial. But when comparing it to its historical volatility, KeyCorp is 2.25 times less risky than Voya Financial. It trades about 0.05 of its potential returns per unit of risk. Voya Financial is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,987  in Voya Financial on September 3, 2024 and sell it today you would earn a total of  1,313  from holding Voya Financial or generate 18.79% return on investment over 90 days.

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

KeyCorp  vs.  Voya Financial

KeyCorp

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Voya Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Voya Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Voya Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KeyCorp and Voya Financial

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

The idea behind KeyCorp and Voya 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.