Correlation Between High Yield and KeyCorp

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

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

Diversification Opportunities for High Yield and KeyCorp

-0.24

Correlation Coefficient

High Yield  KeyCorp

Very good diversification

The 3 months correlation between High and KeyCorp is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and High Yield 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 High Yield Municipal Fund 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 High Yield i.e., High Yield and KeyCorp go up and down completely randomly.

Pair Corralation between High Yield and KeyCorp

Assuming the 90 days horizon High Yield Municipal Fund is expected to generate 0.22 times more return on investment than KeyCorp. However, High Yield Municipal Fund is 4.6 times less risky than KeyCorp. It trades about -0.08 of its potential returns per unit of risk. KeyCorp is currently generating about -0.08 per unit of risk. If you would invest  896.00  in High Yield Municipal Fund on September 20, 2024 and sell it today you would lose (3.00) from holding High Yield Municipal Fund or give up 0.33% of portfolio value over 90 days.

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

High Yield Municipal Fund  vs.  KeyCorp

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KeyCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KeyCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with High Yield and KeyCorp

The main advantage of trading using opposite High Yield and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield 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 High Yield Municipal Fund 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..