Correlation Between KEYCORP and Western Digital

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

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

Diversification Opportunities for KEYCORP and Western Digital

0.34

Correlation Coefficient

KEYCORP  Western Digital

Weak diversification

The 3 months correlation between KEYCORP and Western is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding KEYCORP MTN and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of KEYCORP i.e., KEYCORP and Western Digital go up and down completely randomly.

Pair Corralation between KEYCORP and Western Digital

Assuming the 90 days trading horizon KEYCORP MTN is expected to under-perform the Western Digital. But the bond apears to be less risky and, when comparing its historical volatility, KEYCORP MTN is 4.24 times less risky than Western Digital. The bond trades about -0.01 of its potential returns per unit of risk. The Western Digital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,051  in Western Digital on October 6, 2024 and sell it today you would earn a total of  1,356  from holding Western Digital or generate 26.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

KEYCORP MTN  vs.  Western Digital

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 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 MTN investors.

Western Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KEYCORP and Western Digital

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

The idea behind KEYCORP MTN and Western Digital 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.