Correlation Between McGrath RentCorp and KEYCORP

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

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

Diversification Opportunities for McGrath RentCorp and KEYCORP

0.51

Correlation Coefficient

McGrath RentCorp  KEYCORP

Very weak diversification

The 3 months correlation between McGrath and KEYCORP is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and KEYCORP MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MTN and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with KEYCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP MTN has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and KEYCORP go up and down completely randomly.

Pair Corralation between McGrath RentCorp and KEYCORP

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 0.82 times more return on investment than KEYCORP. However, McGrath RentCorp is 1.22 times less risky than KEYCORP. It trades about 0.12 of its potential returns per unit of risk. KEYCORP MTN is currently generating about -0.13 per unit of risk. If you would invest  10,581  in McGrath RentCorp on October 23, 2024 and sell it today you would earn a total of  1,247  from holding McGrath RentCorp or generate 11.79% return on investment over 90 days.

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

McGrath RentCorp  vs.  KEYCORP MTN

McGrath RentCorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, McGrath RentCorp exhibited solid returns over the last few months and may actually be approaching a breakup point.

KEYCORP MTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for KEYCORP MTN investors.

Pair Trading with McGrath RentCorp and KEYCORP

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

The idea behind McGrath RentCorp and KEYCORP MTN 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.