Correlation Between KeyCorp and First Community

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

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

Diversification Opportunities for KeyCorp and First Community

-0.06

Correlation Coefficient

KeyCorp  First Community

Good diversification

The 3 months correlation between KeyCorp and First is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Banc has no effect on the direction of KeyCorp i.e., KeyCorp and First Community go up and down completely randomly.

Pair Corralation between KeyCorp and First Community

Assuming the 90 days trading horizon KeyCorp is expected to generate 0.35 times more return on investment than First Community. However, KeyCorp is 2.89 times less risky than First Community. It trades about 0.05 of its potential returns per unit of risk. First Community Bancshares is currently generating about 0.0 per unit of risk. If you would invest  2,281  in KeyCorp on September 21, 2024 and sell it today you would earn a total of  100.00  from holding KeyCorp or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.07%
Values	Daily Returns

KeyCorp  vs.  First Community Bancshares

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.

First Community Banc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KeyCorp and First Community

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

The idea behind KeyCorp and First Community Bancshares 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.