Correlation Between KEYBANK and QBE Insurance

Can any of the company-specific risk be diversified away by investing in both KEYBANK and QBE Insurance 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 QBE Insurance 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 QBE Insurance Group, you can compare the effects of market volatilities on KEYBANK and QBE Insurance 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 QBE Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEYBANK and QBE Insurance.

Diversification Opportunities for KEYBANK and QBE Insurance

0.2

Correlation Coefficient

KEYBANK  QBE Insurance

Modest diversification

The 3 months correlation between KEYBANK and QBE is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding KEYBANK NATL ASSN and QBE Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QBE Insurance Group 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 QBE Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QBE Insurance Group has no effect on the direction of KEYBANK i.e., KEYBANK and QBE Insurance go up and down completely randomly.

Pair Corralation between KEYBANK and QBE Insurance

Assuming the 90 days trading horizon KEYBANK NATL ASSN is expected to under-perform the QBE Insurance. But the bond apears to be less risky and, when comparing its historical volatility, KEYBANK NATL ASSN is 4.53 times less risky than QBE Insurance. The bond trades about -0.22 of its potential returns per unit of risk. The QBE Insurance Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,165  in QBE Insurance Group on September 26, 2024 and sell it today you would earn a total of  25.00  from holding QBE Insurance Group or generate 2.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

KEYBANK NATL ASSN  vs.  QBE Insurance Group

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

QBE Insurance Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in QBE Insurance Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, QBE Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KEYBANK and QBE Insurance

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

The idea behind KEYBANK NATL ASSN and QBE Insurance Group 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.