Correlation Between Pinnacle Financial and KeyCorp

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

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

Diversification Opportunities for Pinnacle Financial and KeyCorp

0.71

Correlation Coefficient

Pinnacle Financial  KeyCorp

Poor diversification

The 3 months correlation between Pinnacle and KeyCorp is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Pinnacle Financial 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 Pinnacle Financial Partners 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 Pinnacle Financial i.e., Pinnacle Financial and KeyCorp go up and down completely randomly.

Pair Corralation between Pinnacle Financial and KeyCorp

Assuming the 90 days horizon Pinnacle Financial is expected to generate 3.76 times less return on investment than KeyCorp. But when comparing it to its historical volatility, Pinnacle Financial Partners is 1.58 times less risky than KeyCorp. It trades about 0.02 of its potential returns per unit of risk. KeyCorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,121  in KeyCorp on December 28, 2024 and sell it today you would earn a total of  51.00  from holding KeyCorp or generate 2.4% return on investment over 90 days.

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

Pinnacle Financial Partners  vs.  KeyCorp

Pinnacle Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Financial Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pinnacle Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

KeyCorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, KeyCorp is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Pinnacle Financial and KeyCorp

The main advantage of trading using opposite Pinnacle Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Financial 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 Pinnacle Financial Partners 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.