Correlation Between CIT Group and KeyCorp

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

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

Diversification Opportunities for CIT Group and KeyCorp

0.65

Correlation Coefficient

CIT Group  KeyCorp

Poor diversification

The 3 months correlation between CIT and KeyCorp is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CIT Group Preferred and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and CIT Group 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 CIT Group Preferred 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 CIT Group i.e., CIT Group and KeyCorp go up and down completely randomly.

Pair Corralation between CIT Group and KeyCorp

Assuming the 90 days horizon CIT Group Preferred is expected to under-perform the KeyCorp. In addition to that, CIT Group is 1.01 times more volatile than KeyCorp. It trades about -0.09 of its total potential returns per unit of risk. KeyCorp is currently generating about -0.03 per unit of volatility. If you would invest  2,500  in KeyCorp on October 10, 2024 and sell it today you would lose (38.00) from holding KeyCorp or give up 1.52% of portfolio value over 90 days.

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

CIT Group Preferred  vs.  KeyCorp

CIT Group Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIT Group Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, CIT Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

KeyCorp

Risk-Adjusted Performance

0 of 100

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 new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with CIT Group and KeyCorp

The main advantage of trading using opposite CIT Group and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CIT Group 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 CIT Group Preferred 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.