Correlation Between KeyCorp and Expand Energy

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

By analyzing existing cross correlation between KeyCorp and Expand Energy, you can compare the effects of market volatilities on KeyCorp and Expand Energy 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 Expand Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and Expand Energy.

Diversification Opportunities for KeyCorp and Expand Energy

-0.36

Correlation Coefficient

KeyCorp  Expand Energy

Very good diversification

The 3 months correlation between KeyCorp and Expand is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Expand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Expand Energy 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 Expand Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Expand Energy has no effect on the direction of KeyCorp i.e., KeyCorp and Expand Energy go up and down completely randomly.

Pair Corralation between KeyCorp and Expand Energy

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the Expand Energy. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 2.68 times less risky than Expand Energy. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Expand Energy is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  7,189  in Expand Energy on September 30, 2024 and sell it today you would earn a total of  1,774  from holding Expand Energy or generate 24.68% return on investment over 90 days.

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

KeyCorp  vs.  Expand Energy

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.

Expand Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Expand Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Expand Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KeyCorp and Expand Energy

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

The idea behind KeyCorp and Expand Energy 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.