Correlation Between KeyCorp and Texas Capital

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

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

Diversification Opportunities for KeyCorp and Texas Capital

0.56

Correlation Coefficient

KeyCorp  Texas Capital

Very weak diversification

The 3 months correlation between KeyCorp and Texas is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares 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 Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of KeyCorp i.e., KeyCorp and Texas Capital go up and down completely randomly.

Pair Corralation between KeyCorp and Texas Capital

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the Texas Capital. In addition to that, KeyCorp is 1.11 times more volatile than Texas Capital Bancshares. It trades about -0.03 of its total potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.0 per unit of volatility. If you would invest  2,117  in Texas Capital Bancshares on December 2, 2024 and sell it today you would lose (7.00) from holding Texas Capital Bancshares or give up 0.33% of portfolio value over 90 days.

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

KeyCorp  vs.  Texas Capital Bancshares

KeyCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days KeyCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, KeyCorp is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Texas Capital Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Texas Capital is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KeyCorp and Texas Capital

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

The idea behind KeyCorp and Texas Capital 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.