Correlation Between T Rowe and KeyCorp

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

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

Diversification Opportunities for T Rowe and KeyCorp

-0.28

Correlation Coefficient

T Rowe  KeyCorp

Very good diversification

The 3 months correlation between RRTLX and KeyCorp is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and KeyCorp go up and down completely randomly.

Pair Corralation between T Rowe and KeyCorp

Assuming the 90 days horizon T Rowe is expected to generate 1.41 times less return on investment than KeyCorp. But when comparing it to its historical volatility, T Rowe Price is 5.6 times less risky than KeyCorp. It trades about 0.11 of its potential returns per unit of risk. KeyCorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,029  in KeyCorp on September 20, 2024 and sell it today you would earn a total of  377.00  from holding KeyCorp or generate 18.58% return on investment over 90 days.

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

T Rowe Price  vs.  KeyCorp

T Rowe Price

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T Rowe Price has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, T Rowe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with T Rowe and KeyCorp

The main advantage of trading using opposite T Rowe and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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 T Rowe Price 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.