Correlation Between Regions Financial and KeyCorp

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

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

Diversification Opportunities for Regions Financial and KeyCorp

0.89

Correlation Coefficient

Regions Financial  KeyCorp

Very poor diversification

The 3 months correlation between Regions and KeyCorp is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Regions 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 Regions Financial 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 Regions Financial i.e., Regions Financial and KeyCorp go up and down completely randomly.

Pair Corralation between Regions Financial and KeyCorp

Assuming the 90 days horizon Regions Financial is expected to generate 0.86 times more return on investment than KeyCorp. However, Regions Financial is 1.16 times less risky than KeyCorp. It trades about 0.09 of its potential returns per unit of risk. KeyCorp is currently generating about 0.06 per unit of risk. If you would invest  2,406  in Regions Financial on August 30, 2024 and sell it today you would earn a total of  66.00  from holding Regions Financial or generate 2.74% return on investment over 90 days.

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

Regions Financial  vs.  KeyCorp

Regions Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Regions Financial is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

KeyCorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish basic indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Regions Financial and KeyCorp

The main advantage of trading using opposite Regions Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions 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 Regions Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..