Correlation Between Orange County and KeyCorp

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

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

Diversification Opportunities for Orange County and KeyCorp

0.6

Correlation Coefficient

Orange County  KeyCorp

Poor diversification

The 3 months correlation between Orange and KeyCorp is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Orange County Bancorp and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Orange County 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 Orange County 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 Orange County i.e., Orange County and KeyCorp go up and down completely randomly.

Pair Corralation between Orange County and KeyCorp

Considering the 90-day investment horizon Orange County is expected to generate 3.09 times less return on investment than KeyCorp. In addition to that, Orange County is 1.24 times more volatile than KeyCorp. It trades about 0.03 of its total potential returns per unit of risk. KeyCorp is currently generating about 0.11 per unit of volatility. If you would invest  1,673  in KeyCorp on September 2, 2024 and sell it today you would earn a total of  275.00  from holding KeyCorp or generate 16.44% return on investment over 90 days.

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

Orange County Bancorp  vs.  KeyCorp

Orange County Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orange County Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Orange County is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

KeyCorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting technical and fundamental indicators, KeyCorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orange County and KeyCorp

The main advantage of trading using opposite Orange County and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orange County 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 Orange County 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.