Correlation Between KeyCorp and Grupo Financiero

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

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

Diversification Opportunities for KeyCorp and Grupo Financiero

0.31

Correlation Coefficient

KeyCorp  Grupo Financiero

Weak diversification

The 3 months correlation between KeyCorp and Grupo is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Grupo Financiero Galicia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Galicia 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Galicia has no effect on the direction of KeyCorp i.e., KeyCorp and Grupo Financiero go up and down completely randomly.

Pair Corralation between KeyCorp and Grupo Financiero

Assuming the 90 days trading horizon KeyCorp is expected to generate 14.71 times less return on investment than Grupo Financiero. But when comparing it to its historical volatility, KeyCorp is 2.87 times less risky than Grupo Financiero. It trades about 0.05 of its potential returns per unit of risk. Grupo Financiero Galicia is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,029  in Grupo Financiero Galicia on September 3, 2024 and sell it today you would earn a total of  1,894  from holding Grupo Financiero Galicia or generate 47.01% return on investment over 90 days.

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

KeyCorp  vs.  Grupo Financiero Galicia

KeyCorp

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Grupo Financiero Galicia

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Galicia are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite abnormal basic indicators, Grupo Financiero disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KeyCorp and Grupo Financiero

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

The idea behind KeyCorp and Grupo Financiero Galicia 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.