Correlation Between KeyCorp and Nomura Holdings

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

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

Diversification Opportunities for KeyCorp and Nomura Holdings

-0.35

Correlation Coefficient

KeyCorp  Nomura Holdings

Very good diversification

The 3 months correlation between KeyCorp and Nomura is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of KeyCorp i.e., KeyCorp and Nomura Holdings go up and down completely randomly.

Pair Corralation between KeyCorp and Nomura Holdings

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the Nomura Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.38 times less risky than Nomura Holdings. The preferred stock trades about -0.16 of its potential returns per unit of risk. The Nomura Holdings ADR is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  597.00  in Nomura Holdings ADR on September 27, 2024 and sell it today you would lose (17.00) from holding Nomura Holdings ADR or give up 2.85% of portfolio value over 90 days.

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

KeyCorp  vs.  Nomura Holdings ADR

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.

Nomura Holdings ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nomura Holdings ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal primary indicators, Nomura Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KeyCorp and Nomura Holdings

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

The idea behind KeyCorp and Nomura Holdings ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.