Correlation Between KeyCorp and Synovus Financial

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

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

Diversification Opportunities for KeyCorp and Synovus Financial

0.81

Correlation Coefficient

KeyCorp  Synovus Financial

Very poor diversification

The 3 months correlation between KeyCorp and Synovus is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Synovus Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Synovus Financial 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 Synovus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Synovus Financial Corp has no effect on the direction of KeyCorp i.e., KeyCorp and Synovus Financial go up and down completely randomly.

Pair Corralation between KeyCorp and Synovus Financial

Assuming the 90 days trading horizon KeyCorp is expected to generate 3.28 times more return on investment than Synovus Financial. However, KeyCorp is 3.28 times more volatile than Synovus Financial Corp. It trades about 0.18 of its potential returns per unit of risk. Synovus Financial Corp is currently generating about 0.2 per unit of risk. If you would invest  2,200  in KeyCorp on September 2, 2024 and sell it today you would earn a total of  237.00  from holding KeyCorp or generate 10.77% return on investment over 90 days.

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

KeyCorp  vs.  Synovus Financial Corp

KeyCorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Synovus Financial Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Synovus Financial Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Synovus Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KeyCorp and Synovus Financial

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

The idea behind KeyCorp and Synovus Financial 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.