Correlation Between First Bancorp and KeyCorp

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

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

Diversification Opportunities for First Bancorp and KeyCorp

0.19

Correlation Coefficient

First Bancorp  KeyCorp

Average diversification

The 3 months correlation between First and KeyCorp is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and First Bancorp 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 First Bancorp 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 First Bancorp i.e., First Bancorp and KeyCorp go up and down completely randomly.

Pair Corralation between First Bancorp and KeyCorp

Considering the 90-day investment horizon First Bancorp is expected to generate 2.45 times more return on investment than KeyCorp. However, First Bancorp is 2.45 times more volatile than KeyCorp. It trades about 0.05 of its potential returns per unit of risk. KeyCorp is currently generating about 0.01 per unit of risk. If you would invest  1,838  in First Bancorp on December 29, 2024 and sell it today you would earn a total of  82.00  from holding First Bancorp or generate 4.46% return on investment over 90 days.

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

First Bancorp  vs.  KeyCorp

First Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, First Bancorp 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 First Bancorp and KeyCorp

The main advantage of trading using opposite First Bancorp and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp 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 First Bancorp 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 Transaction History module to view history of all your transactions and understand their impact on performance.