Correlation Between KEYBANK and Hudson Technologies

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

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

Diversification Opportunities for KEYBANK and Hudson Technologies

0.22

Correlation Coefficient

KEYBANK  Hudson Technologies

Modest diversification

The 3 months correlation between KEYBANK and Hudson is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding KEYBANK NATL ASSN and Hudson Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hudson Technologies and KEYBANK 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 KEYBANK NATL ASSN are associated (or correlated) with Hudson Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hudson Technologies has no effect on the direction of KEYBANK i.e., KEYBANK and Hudson Technologies go up and down completely randomly.

Pair Corralation between KEYBANK and Hudson Technologies

Assuming the 90 days trading horizon KEYBANK NATL ASSN is expected to under-perform the Hudson Technologies. But the bond apears to be less risky and, when comparing its historical volatility, KEYBANK NATL ASSN is 3.11 times less risky than Hudson Technologies. The bond trades about -0.13 of its potential returns per unit of risk. The Hudson Technologies is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  541.00  in Hudson Technologies on December 26, 2024 and sell it today you would earn a total of  83.00  from holding Hudson Technologies or generate 15.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	68.33%
Values	Daily Returns

KEYBANK NATL ASSN  vs.  Hudson Technologies

KEYBANK NATL ASSN

Risk-Adjusted Performance

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Hudson Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hudson Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Hudson Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KEYBANK and Hudson Technologies

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

The idea behind KEYBANK NATL ASSN and Hudson Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.