Correlation Between Microsoft and KEYBANK

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

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

Diversification Opportunities for Microsoft and KEYBANK

-0.27

Correlation Coefficient

Microsoft  KEYBANK

Very good diversification

The 3 months correlation between Microsoft and KEYBANK is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KEYBANK NATL ASSN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYBANK NATL ASSN and Microsoft 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 Microsoft are associated (or correlated) with KEYBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYBANK NATL ASSN has no effect on the direction of Microsoft i.e., Microsoft and KEYBANK go up and down completely randomly.

Pair Corralation between Microsoft and KEYBANK

Given the investment horizon of 90 days Microsoft is expected to generate 2.32 times more return on investment than KEYBANK. However, Microsoft is 2.32 times more volatile than KEYBANK NATL ASSN. It trades about 0.08 of its potential returns per unit of risk. KEYBANK NATL ASSN is currently generating about 0.11 per unit of risk. If you would invest  33,746  in Microsoft on September 19, 2024 and sell it today you would earn a total of  9,993  from holding Microsoft or generate 29.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	62.41%
Values	Daily Returns

Microsoft  vs.  KEYBANK NATL ASSN

Microsoft

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

KEYBANK NATL ASSN

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEYBANK NATL ASSN are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KEYBANK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Microsoft and KEYBANK

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

The idea behind Microsoft and KEYBANK NATL ASSN 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..