Correlation Between Analog Devices and KEYCORP

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

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

Diversification Opportunities for Analog Devices and KEYCORP

0.21

Correlation Coefficient

Analog Devices  KEYCORP

Modest diversification

The 3 months correlation between Analog and KEYCORP is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and KEYCORP MEDIUM TERM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MEDIUM TERM and Analog Devices 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 Analog Devices 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 MEDIUM TERM has no effect on the direction of Analog Devices i.e., Analog Devices and KEYCORP go up and down completely randomly.

Pair Corralation between Analog Devices and KEYCORP

Considering the 90-day investment horizon Analog Devices is expected to under-perform the KEYCORP. In addition to that, Analog Devices is 5.37 times more volatile than KEYCORP MEDIUM TERM. It trades about -0.02 of its total potential returns per unit of risk. KEYCORP MEDIUM TERM is currently generating about 0.01 per unit of volatility. If you would invest  9,927  in KEYCORP MEDIUM TERM on December 23, 2024 and sell it today you would earn a total of  26.00  from holding KEYCORP MEDIUM TERM or generate 0.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Analog Devices  vs.  KEYCORP MEDIUM TERM

Analog Devices

Risk-Adjusted Performance

Very Weak

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

KEYCORP MEDIUM TERM

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEYCORP MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYCORP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and KEYCORP

The main advantage of trading using opposite Analog Devices and KEYCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices 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 Analog Devices and KEYCORP MEDIUM TERM 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.