Correlation Between KeyCorp and AmTrust Financial

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

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

Diversification Opportunities for KeyCorp and AmTrust Financial

-0.34

Correlation Coefficient

KeyCorp  AmTrust Financial

Very good diversification

The 3 months correlation between KeyCorp and AmTrust is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial and KeyCorp 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 KeyCorp are associated (or correlated) with AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of KeyCorp i.e., KeyCorp and AmTrust Financial go up and down completely randomly.

Pair Corralation between KeyCorp and AmTrust Financial

Assuming the 90 days trading horizon KeyCorp is expected to generate 0.3 times more return on investment than AmTrust Financial. However, KeyCorp is 3.34 times less risky than AmTrust Financial. It trades about -0.16 of its potential returns per unit of risk. AmTrust Financial Services is currently generating about -0.05 per unit of risk. If you would invest  2,467  in KeyCorp on September 24, 2024 and sell it today you would lose (74.00) from holding KeyCorp or give up 3.0% of portfolio value over 90 days.

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

KeyCorp  vs.  AmTrust Financial Services

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

AmTrust Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, AmTrust Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KeyCorp and AmTrust Financial

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

The idea behind KeyCorp and AmTrust Financial Services 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.