Correlation Between KeyCorp and Western Union

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

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

Diversification Opportunities for KeyCorp and Western Union

0.37

Correlation Coefficient

KeyCorp  Western Union

Weak diversification

The 3 months correlation between KeyCorp and Western is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Western Union Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Union 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 Western Union. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Union has no effect on the direction of KeyCorp i.e., KeyCorp and Western Union go up and down completely randomly.

Pair Corralation between KeyCorp and Western Union

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the Western Union. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.58 times less risky than Western Union. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Western Union Co is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,086  in Western Union Co on September 19, 2024 and sell it today you would earn a total of  33.00  from holding Western Union Co or generate 3.04% 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.  Western Union Co

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.

Western Union

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Union Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Western Union is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KeyCorp and Western Union

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

The idea behind KeyCorp and Western Union Co 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.