Correlation Between KEY and MTL

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

By analyzing existing cross correlation between KEY and MTL, you can compare the effects of market volatilities on KEY and MTL 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 KEY with a short position of MTL. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEY and MTL.

Diversification Opportunities for KEY and MTL

0.89

Correlation Coefficient

KEY  MTL

Very poor diversification

The 3 months correlation between KEY and MTL is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding KEY and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL and KEY 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 KEY are associated (or correlated) with MTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTL has no effect on the direction of KEY i.e., KEY and MTL go up and down completely randomly.

Pair Corralation between KEY and MTL

Assuming the 90 days trading horizon KEY is expected to under-perform the MTL. In addition to that, KEY is 1.8 times more volatile than MTL. It trades about -0.06 of its total potential returns per unit of risk. MTL is currently generating about -0.08 per unit of volatility. If you would invest  112.00  in MTL on December 28, 2024 and sell it today you would lose (35.00) from holding MTL or give up 31.25% of portfolio value over 90 days.

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

KEY  vs.  MTL

KEY

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for KEY shareholders.

MTL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MTL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for MTL shareholders.

Pair Trading with KEY and MTL

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

The idea behind KEY and MTL 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.