Correlation Between KeyCorp and PACCAR

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

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

Diversification Opportunities for KeyCorp and PACCAR

0.94

Correlation Coefficient

KeyCorp  PACCAR

Almost no diversification

The 3 months correlation between KeyCorp and PACCAR is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of KeyCorp i.e., KeyCorp and PACCAR go up and down completely randomly.

Pair Corralation between KeyCorp and PACCAR

Assuming the 90 days horizon KeyCorp is expected to under-perform the PACCAR. But the stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.23 times less risky than PACCAR. The stock trades about -0.54 of its potential returns per unit of risk. The PACCAR Inc is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  10,721  in PACCAR Inc on September 27, 2024 and sell it today you would lose (681.00) from holding PACCAR Inc or give up 6.35% of portfolio value over 90 days.

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

KeyCorp  vs.  PACCAR Inc

KeyCorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PACCAR Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PACCAR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KeyCorp and PACCAR

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

The idea behind KeyCorp and PACCAR Inc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.