Correlation Between Bt Brands and KEYCORP

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

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

Diversification Opportunities for Bt Brands and KEYCORP

0.25

Correlation Coefficient

Bt Brands  KEYCORP

Modest diversification

The 3 months correlation between BTBD and KEYCORP is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bt Brands and KEYCORP MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MTN and Bt Brands 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 Bt Brands 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 MTN has no effect on the direction of Bt Brands i.e., Bt Brands and KEYCORP go up and down completely randomly.

Pair Corralation between Bt Brands and KEYCORP

Given the investment horizon of 90 days Bt Brands is expected to generate 1.03 times more return on investment than KEYCORP. However, Bt Brands is 1.03 times more volatile than KEYCORP MTN. It trades about -0.08 of its potential returns per unit of risk. KEYCORP MTN is currently generating about -0.22 per unit of risk. If you would invest  157.00  in Bt Brands on September 21, 2024 and sell it today you would lose (12.00) from holding Bt Brands or give up 7.64% of portfolio value over 90 days.

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

Bt Brands  vs.  KEYCORP MTN

Bt Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bt Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KEYCORP MTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for KEYCORP MTN investors.

Pair Trading with Bt Brands and KEYCORP

The main advantage of trading using opposite Bt Brands and KEYCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bt Brands 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 Bt Brands and KEYCORP MTN 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.