Correlation Between Aldel Financial and KeyCorp

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

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

Diversification Opportunities for Aldel Financial and KeyCorp

0.06

Correlation Coefficient

Aldel Financial  KeyCorp

Significant diversification

The 3 months correlation between Aldel and KeyCorp is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and KeyCorp go up and down completely randomly.

Pair Corralation between Aldel Financial and KeyCorp

Given the investment horizon of 90 days Aldel Financial is expected to generate 1.47 times less return on investment than KeyCorp. But when comparing it to its historical volatility, Aldel Financial II is 6.94 times less risky than KeyCorp. It trades about 0.15 of its potential returns per unit of risk. KeyCorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,450  in KeyCorp on October 10, 2024 and sell it today you would earn a total of  12.00  from holding KeyCorp or generate 0.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

Aldel Financial II  vs.  KeyCorp

Aldel Financial II

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Aldel Financial and KeyCorp

The main advantage of trading using opposite Aldel Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.