Correlation Between GM and KEYCORP

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

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

Diversification Opportunities for GM and KEYCORP

-0.14

Correlation Coefficient

GM  KEYCORP

Good diversification

The 3 months correlation between GM and KEYCORP is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and KEYCORP MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MTN and GM 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 General Motors 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 MTN has no effect on the direction of GM i.e., GM and KEYCORP go up and down completely randomly.

Pair Corralation between GM and KEYCORP

Allowing for the 90-day total investment horizon General Motors is expected to under-perform the KEYCORP. In addition to that, GM is 1.83 times more volatile than KEYCORP MTN. It trades about -0.19 of its total potential returns per unit of risk. KEYCORP MTN is currently generating about -0.21 per unit of volatility. If you would invest  9,402  in KEYCORP MTN on September 19, 2024 and sell it today you would lose (617.00) from holding KEYCORP MTN or give up 6.56% of portfolio value over 90 days.

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

General Motors  vs.  KEYCORP MTN

General Motors

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, GM is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

KEYCORP MTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KEYCORP MTN investors.

Pair Trading with GM and KEYCORP

The main advantage of trading using opposite GM and KEYCORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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 General Motors and KEYCORP MTN 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.