Correlation Between MT Bank and KeyCorp

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

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

Diversification Opportunities for MT Bank and KeyCorp

0.52

Correlation Coefficient

MT Bank  KeyCorp

Very weak diversification

The 3 months correlation between MTB-PH and KeyCorp is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and MT Bank 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 MT Bank 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 has no effect on the direction of MT Bank i.e., MT Bank and KeyCorp go up and down completely randomly.

Pair Corralation between MT Bank and KeyCorp

Assuming the 90 days trading horizon MT Bank is expected to generate 2.77 times less return on investment than KeyCorp. But when comparing it to its historical volatility, MT Bank is 1.66 times less risky than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,013  in KeyCorp on September 24, 2024 and sell it today you would earn a total of  380.00  from holding KeyCorp or generate 18.88% return on investment over 90 days.

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

MT Bank  vs.  KeyCorp

MT Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MT Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, MT Bank is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

KeyCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KeyCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MT Bank and KeyCorp

The main advantage of trading using opposite MT Bank and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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 MT Bank and KeyCorp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.