Correlation Between Community West and KeyCorp

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

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

Diversification Opportunities for Community West and KeyCorp

-0.24

Correlation Coefficient

Community West  KeyCorp

Very good diversification

The 3 months correlation between Community and KeyCorp is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Community West Bancshares and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Community West 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 Community West Bancshares 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 Community West i.e., Community West and KeyCorp go up and down completely randomly.

Pair Corralation between Community West and KeyCorp

Given the investment horizon of 90 days Community West Bancshares is expected to generate 2.1 times more return on investment than KeyCorp. However, Community West is 2.1 times more volatile than KeyCorp. It trades about 0.09 of its potential returns per unit of risk. KeyCorp is currently generating about 0.06 per unit of risk. If you would invest  2,028  in Community West Bancshares on August 30, 2024 and sell it today you would earn a total of  168.00  from holding Community West Bancshares or generate 8.28% return on investment over 90 days.

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

Community West Bancshares  vs.  KeyCorp

Community West Bancshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Community West Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental drivers, Community West may actually be approaching a critical reversion point that can send shares even higher in December 2024.

KeyCorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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 Community West and KeyCorp

The main advantage of trading using opposite Community West and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community West 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 Community West Bancshares 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.