Correlation Between KeyCorp and First Bancshares

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

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

Diversification Opportunities for KeyCorp and First Bancshares

-0.32

Correlation Coefficient

KeyCorp  First Bancshares

Very good diversification

The 3 months correlation between KeyCorp and First is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First 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 First Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of KeyCorp i.e., KeyCorp and First Bancshares go up and down completely randomly.

Pair Corralation between KeyCorp and First Bancshares

Assuming the 90 days trading horizon KeyCorp is expected to generate 0.33 times more return on investment than First Bancshares. However, KeyCorp is 3.03 times less risky than First Bancshares. It trades about -0.28 of its potential returns per unit of risk. First Bancshares is currently generating about -0.11 per unit of risk. If you would invest  2,316  in KeyCorp on October 12, 2024 and sell it today you would lose (160.00) from holding KeyCorp or give up 6.91% of portfolio value over 90 days.

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

KeyCorp  vs.  First 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 latest sluggish performance, the Preferred Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

First Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, First Bancshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KeyCorp and First Bancshares

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

The idea behind KeyCorp and First 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.