Correlation Between Sparta Capital and KeyCorp

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

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

Diversification Opportunities for Sparta Capital and KeyCorp

0.51

Correlation Coefficient

Sparta Capital  KeyCorp

Very weak diversification

The 3 months correlation between Sparta and KeyCorp is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Sparta Capital 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 Sparta Capital 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 Sparta Capital i.e., Sparta Capital and KeyCorp go up and down completely randomly.

Pair Corralation between Sparta Capital and KeyCorp

Assuming the 90 days horizon Sparta Capital is expected to generate 5.8 times more return on investment than KeyCorp. However, Sparta Capital is 5.8 times more volatile than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about 0.03 per unit of risk. If you would invest  1.10  in Sparta Capital on September 20, 2024 and sell it today you would earn a total of  0.40  from holding Sparta Capital or generate 36.36% return on investment over 90 days.

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

Sparta Capital  vs.  KeyCorp

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Sparta Capital and KeyCorp

The main advantage of trading using opposite Sparta Capital and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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 Sparta Capital 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.