Correlation Between TARGET and KEYCORP

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

By analyzing existing cross correlation between TARGET P 7 and KEYCORP MTN, you can compare the effects of market volatilities on TARGET and KEYCORP 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 TARGET with a short position of KEYCORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of TARGET and KEYCORP.

Diversification Opportunities for TARGET and KEYCORP

-0.13

Correlation Coefficient

TARGET  KEYCORP

Good diversification

The 3 months correlation between TARGET and KEYCORP is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding TARGET P 7 and KEYCORP MTN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEYCORP MTN and TARGET 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 TARGET P 7 are associated (or correlated) with KEYCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEYCORP MTN has no effect on the direction of TARGET i.e., TARGET and KEYCORP go up and down completely randomly.

Pair Corralation between TARGET and KEYCORP

Assuming the 90 days trading horizon TARGET P 7 is expected to generate 1.59 times more return on investment than KEYCORP. However, TARGET is 1.59 times more volatile than KEYCORP MTN. It trades about 0.08 of its potential returns per unit of risk. KEYCORP MTN is currently generating about -0.1 per unit of risk. If you would invest  10,975  in TARGET P 7 on December 27, 2024 and sell it today you would earn a total of  185.00  from holding TARGET P 7 or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.15%
Values	Daily Returns

TARGET P 7  vs.  KEYCORP MTN

TARGET P 7

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, TARGET is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

KEYCORP MTN

Risk-Adjusted Performance

Very Weak

Over the last 90 days KEYCORP MTN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KEYCORP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with TARGET and KEYCORP

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

The idea behind TARGET P 7 and KEYCORP MTN 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.