Correlation Between Citizens Financial and KeyCorp

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

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

Diversification Opportunities for Citizens Financial and KeyCorp

0.21

Correlation Coefficient

Citizens Financial  KeyCorp

Modest diversification

The 3 months correlation between Citizens and KeyCorp is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Citizens 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 Citizens Financial Group 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 Citizens Financial i.e., Citizens Financial and KeyCorp go up and down completely randomly.

Pair Corralation between Citizens Financial and KeyCorp

Assuming the 90 days trading horizon Citizens Financial Group is expected to under-perform the KeyCorp. In addition to that, Citizens Financial is 1.51 times more volatile than KeyCorp. It trades about -0.03 of its total potential returns per unit of risk. KeyCorp is currently generating about 0.04 per unit of volatility. If you would invest  2,484  in KeyCorp on October 8, 2024 and sell it today you would earn a total of  15.00  from holding KeyCorp or generate 0.6% return on investment over 90 days.

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

Citizens Financial Group  vs.  KeyCorp

Citizens Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citizens Financial Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Preferred Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

KeyCorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, KeyCorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Citizens Financial and KeyCorp

The main advantage of trading using opposite Citizens Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens 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 Citizens Financial Group 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.