Correlation Between BBVA Banco and KeyCorp

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

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

Diversification Opportunities for BBVA Banco and KeyCorp

-0.08

Correlation Coefficient

BBVA Banco  KeyCorp

Good diversification

The 3 months correlation between BBVA and KeyCorp is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Banco Frances and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and BBVA Banco 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 BBVA Banco Frances 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 BBVA Banco i.e., BBVA Banco and KeyCorp go up and down completely randomly.

Pair Corralation between BBVA Banco and KeyCorp

Given the investment horizon of 90 days BBVA Banco Frances is expected to generate 5.71 times more return on investment than KeyCorp. However, BBVA Banco is 5.71 times more volatile than KeyCorp. It trades about 0.02 of its potential returns per unit of risk. KeyCorp is currently generating about 0.01 per unit of risk. If you would invest  1,905  in BBVA Banco Frances on December 29, 2024 and sell it today you would earn a total of  9.00  from holding BBVA Banco Frances or generate 0.47% return on investment over 90 days.

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

BBVA Banco Frances  vs.  KeyCorp

BBVA Banco Frances

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, BBVA Banco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

KeyCorp

Risk-Adjusted Performance

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 latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with BBVA Banco and KeyCorp

The main advantage of trading using opposite BBVA Banco and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Banco 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 BBVA Banco Frances 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.