Correlation Between KeyCorp and MBT Bancshares

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

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

Diversification Opportunities for KeyCorp and MBT Bancshares

-0.2

Correlation Coefficient

KeyCorp  MBT Bancshares

Good diversification

The 3 months correlation between KeyCorp and MBT is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and MBT Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBT 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 MBT Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBT Bancshares has no effect on the direction of KeyCorp i.e., KeyCorp and MBT Bancshares go up and down completely randomly.

Pair Corralation between KeyCorp and MBT Bancshares

Considering the 90-day investment horizon KeyCorp is expected to under-perform the MBT Bancshares. In addition to that, KeyCorp is 2.16 times more volatile than MBT Bancshares. It trades about -0.02 of its total potential returns per unit of risk. MBT Bancshares is currently generating about -0.02 per unit of volatility. If you would invest  2,100  in MBT Bancshares on December 27, 2024 and sell it today you would lose (25.00) from holding MBT Bancshares or give up 1.19% of portfolio value over 90 days.

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

KeyCorp  vs.  MBT 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. In spite of fairly strong technical and fundamental indicators, KeyCorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

MBT Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days MBT Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, MBT Bancshares is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KeyCorp and MBT Bancshares

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

The idea behind KeyCorp and MBT 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.