Correlation Between Ford and KEYBANK

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

By analyzing existing cross correlation between Ford Motor and KEYBANK NATL ASSN, you can compare the effects of market volatilities on Ford and KEYBANK 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 Ford with a short position of KEYBANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and KEYBANK.

Diversification Opportunities for Ford and KEYBANK

0.42

Correlation Coefficient

Ford  KEYBANK

Very weak diversification

The 3 months correlation between Ford and KEYBANK is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and KEYBANK NATL ASSN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYBANK NATL ASSN and Ford 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 Ford Motor are associated (or correlated) with KEYBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYBANK NATL ASSN has no effect on the direction of Ford i.e., Ford and KEYBANK go up and down completely randomly.

Pair Corralation between Ford and KEYBANK

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the KEYBANK. In addition to that, Ford is 9.07 times more volatile than KEYBANK NATL ASSN. It trades about -0.07 of its total potential returns per unit of risk. KEYBANK NATL ASSN is currently generating about 0.08 per unit of volatility. If you would invest  9,728  in KEYBANK NATL ASSN on September 19, 2024 and sell it today you would earn a total of  61.00  from holding KEYBANK NATL ASSN or generate 0.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	53.13%
Values	Daily Returns

Ford Motor  vs.  KEYBANK NATL ASSN

Ford Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

KEYBANK NATL ASSN

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEYBANK NATL ASSN are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KEYBANK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ford and KEYBANK

The main advantage of trading using opposite Ford and KEYBANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, KEYBANK 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 KEYBANK will offset losses from the drop in KEYBANK's long position.

The idea behind Ford Motor and KEYBANK NATL ASSN 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.