Correlation Between KeyCorp and PNC Financial

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

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

Diversification Opportunities for KeyCorp and PNC Financial

0.96

Correlation Coefficient

KeyCorp  PNC Financial

Almost no diversification

The 3 months correlation between KeyCorp and PNC is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and The PNC Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PNC Financial 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 PNC Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PNC Financial has no effect on the direction of KeyCorp i.e., KeyCorp and PNC Financial go up and down completely randomly.

Pair Corralation between KeyCorp and PNC Financial

Assuming the 90 days horizon KeyCorp is expected to generate 1.09 times more return on investment than PNC Financial. However, KeyCorp is 1.09 times more volatile than The PNC Financial. It trades about -0.04 of its potential returns per unit of risk. The PNC Financial is currently generating about -0.1 per unit of risk. If you would invest  1,610  in KeyCorp on December 28, 2024 and sell it today you would lose (86.00) from holding KeyCorp or give up 5.34% 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.  The PNC Financial

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. Despite nearly stable basic indicators, KeyCorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PNC Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days The PNC Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KeyCorp and PNC Financial

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

The idea behind KeyCorp and The PNC Financial 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 Transaction History module to view history of all your transactions and understand their impact on performance.