Correlation Between KEY and Stacks

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

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

Diversification Opportunities for KEY and Stacks

-0.48

Correlation Coefficient

KEY  Stacks

Very good diversification

The 3 months correlation between KEY and Stacks is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KEY and Stacks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stacks and KEY 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 KEY are associated (or correlated) with Stacks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stacks has no effect on the direction of KEY i.e., KEY and Stacks go up and down completely randomly.

Pair Corralation between KEY and Stacks

Assuming the 90 days trading horizon KEY is expected to under-perform the Stacks. In addition to that, KEY is 1.23 times more volatile than Stacks. It trades about -0.14 of its total potential returns per unit of risk. Stacks is currently generating about 0.16 per unit of volatility. If you would invest  142.00  in Stacks on September 1, 2024 and sell it today you would earn a total of  90.00  from holding Stacks or generate 63.38% return on investment over 90 days.

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

KEY  vs.  Stacks

KEY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for KEY shareholders.

Stacks

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Stacks are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Stacks exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEY and Stacks

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

The idea behind KEY and Stacks 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.