Correlation Between KEYBANK and Stepan

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

Diversification Opportunities for KEYBANK and Stepan

KEYBANKStepanDiversified AwayKEYBANKStepanDiversified Away100%
0.22
  Correlation Coefficient

Modest diversification

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

Pair Corralation between KEYBANK and Stepan

Assuming the 90 days trading horizon KEYBANK NATL ASSN is expected to generate 0.24 times more return on investment than Stepan. However, KEYBANK NATL ASSN is 4.21 times less risky than Stepan. It trades about -0.15 of its potential returns per unit of risk. Stepan Company is currently generating about -0.09 per unit of risk. If you would invest  9,774  in KEYBANK NATL ASSN on September 25, 2024 and sell it today you would lose (228.00) from holding KEYBANK NATL ASSN or give up 2.33% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy54.69%
ValuesDaily Returns

KEYBANK NATL ASSN  vs.  Stepan Company

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -4-20246
JavaScript chart by amCharts 3.21.1549327V2A1 SCL
       Timeline  
KEYBANK NATL ASSN 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15312460229495969798
Stepan Company 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Stepan Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec666870727476788082

KEYBANK and Stepan Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.98-0.71-0.44-0.17-0.020.08480.330.60.871.14 0.20.40.60.81.01.2
JavaScript chart by amCharts 3.21.1549327V2A1 SCL
       Returns  

Pair Trading with KEYBANK and Stepan

The main advantage of trading using opposite KEYBANK and Stepan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEYBANK position performs unexpectedly, Stepan 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 Stepan will offset losses from the drop in Stepan's long position.
The idea behind KEYBANK NATL ASSN and Stepan Company 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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