Correlation Between Lake Shore and KeyCorp

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

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

Diversification Opportunities for Lake Shore and KeyCorp

0.41

Correlation Coefficient

Lake Shore  KeyCorp

Very weak diversification

The 3 months correlation between Lake and KeyCorp is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Lake Shore 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 Lake Shore Bancorp are associated (or correlated) with KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Lake Shore i.e., Lake Shore and KeyCorp go up and down completely randomly.

Pair Corralation between Lake Shore and KeyCorp

Given the investment horizon of 90 days Lake Shore Bancorp is expected to under-perform the KeyCorp. But the stock apears to be less risky and, when comparing its historical volatility, Lake Shore Bancorp is 1.3 times less risky than KeyCorp. The stock trades about 0.0 of its potential returns per unit of risk. The KeyCorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,637  in KeyCorp on September 26, 2024 and sell it today you would earn a total of  100.00  from holding KeyCorp or generate 6.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Lake Shore Bancorp  vs.  KeyCorp

Lake Shore Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Shore Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Lake Shore is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

KeyCorp

Risk-Adjusted Performance

3 of 100

Insignificant

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. In spite of fairly inconsistent technical and fundamental indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lake Shore and KeyCorp

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

The idea behind Lake Shore Bancorp and KeyCorp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.