Correlation Between KEYCORP and Youdao

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

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

Diversification Opportunities for KEYCORP and Youdao

0.15

Correlation Coefficient

KEYCORP  Youdao

Average diversification

The 3 months correlation between KEYCORP and Youdao is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KEYCORP MEDIUM TERM and Youdao Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Youdao Inc and KEYCORP 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 KEYCORP MEDIUM TERM are associated (or correlated) with Youdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Youdao Inc has no effect on the direction of KEYCORP i.e., KEYCORP and Youdao go up and down completely randomly.

Pair Corralation between KEYCORP and Youdao

Assuming the 90 days trading horizon KEYCORP MEDIUM TERM is expected to under-perform the Youdao. But the bond apears to be less risky and, when comparing its historical volatility, KEYCORP MEDIUM TERM is 6.12 times less risky than Youdao. The bond trades about -0.11 of its potential returns per unit of risk. The Youdao Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  713.00  in Youdao Inc on December 23, 2024 and sell it today you would earn a total of  65.00  from holding Youdao Inc or generate 9.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

KEYCORP MEDIUM TERM  vs.  Youdao Inc

KEYCORP MEDIUM TERM

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEYCORP MEDIUM TERM has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KEYCORP MEDIUM TERM investors.

Youdao Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Youdao Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Youdao displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEYCORP and Youdao

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

The idea behind KEYCORP MEDIUM TERM and Youdao Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.