Correlation Between KEYCORP and Eastman Chemical

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

By analyzing existing cross correlation between KEYCORP MTN and Eastman Chemical, you can compare the effects of market volatilities on KEYCORP and Eastman Chemical 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 Eastman Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEYCORP and Eastman Chemical.

Diversification Opportunities for KEYCORP and Eastman Chemical

0.59

Correlation Coefficient

KEYCORP  Eastman Chemical

Very weak diversification

The 3 months correlation between KEYCORP and Eastman is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding KEYCORP MTN and Eastman Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastman Chemical 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 MTN are associated (or correlated) with Eastman Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastman Chemical has no effect on the direction of KEYCORP i.e., KEYCORP and Eastman Chemical go up and down completely randomly.

Pair Corralation between KEYCORP and Eastman Chemical

Assuming the 90 days trading horizon KEYCORP is expected to generate 5.4 times less return on investment than Eastman Chemical. But when comparing it to its historical volatility, KEYCORP MTN is 2.5 times less risky than Eastman Chemical. It trades about 0.04 of its potential returns per unit of risk. Eastman Chemical is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,617  in Eastman Chemical on September 19, 2024 and sell it today you would earn a total of  2,478  from holding Eastman Chemical or generate 37.45% return on investment over 90 days.

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

KEYCORP MTN  vs.  Eastman Chemical

KEYCORP MTN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEYCORP MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 MTN investors.

Eastman Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eastman Chemical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with KEYCORP and Eastman Chemical

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

The idea behind KEYCORP MTN and Eastman Chemical 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.