Correlation Between Stepan and KEYBANK

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

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

Diversification Opportunities for Stepan and KEYBANK

0.09

Correlation Coefficient

Stepan  KEYBANK

Significant diversification

The 3 months correlation between Stepan and KEYBANK is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Stepan Company and KEYBANK NATL ASSN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYBANK NATL ASSN and Stepan 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 Stepan Company are associated (or correlated) with KEYBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYBANK NATL ASSN has no effect on the direction of Stepan i.e., Stepan and KEYBANK go up and down completely randomly.

Pair Corralation between Stepan and KEYBANK

Considering the 90-day investment horizon Stepan Company is expected to under-perform the KEYBANK. In addition to that, Stepan is 1.88 times more volatile than KEYBANK NATL ASSN. It trades about -0.28 of its total potential returns per unit of risk. KEYBANK NATL ASSN is currently generating about -0.22 per unit of volatility. If you would invest  9,758  in KEYBANK NATL ASSN on September 20, 2024 and sell it today you would lose (289.00) from holding KEYBANK NATL ASSN or give up 2.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Stepan Company  vs.  KEYBANK NATL ASSN

Stepan Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

KEYBANK NATL ASSN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYBANK NATL ASSN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYBANK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stepan and KEYBANK

The main advantage of trading using opposite Stepan and KEYBANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stepan position performs unexpectedly, KEYBANK 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 KEYBANK will offset losses from the drop in KEYBANK's long position.

The idea behind Stepan Company and KEYBANK NATL ASSN 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.