Correlation Between KeyCorp and Washington Federal

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

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

Diversification Opportunities for KeyCorp and Washington Federal

0.36

Correlation Coefficient

KeyCorp  Washington Federal

Weak diversification

The 3 months correlation between KeyCorp and Washington is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of KeyCorp i.e., KeyCorp and Washington Federal go up and down completely randomly.

Pair Corralation between KeyCorp and Washington Federal

Assuming the 90 days trading horizon KeyCorp is expected to generate 0.71 times more return on investment than Washington Federal. However, KeyCorp is 1.41 times less risky than Washington Federal. It trades about 0.18 of its potential returns per unit of risk. Washington Federal is currently generating about 0.06 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

KeyCorp  vs.  Washington Federal

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.

Washington Federal

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KeyCorp and Washington Federal

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

The idea behind KeyCorp and Washington Federal 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.