Correlation Between Voya Financial and KeyCorp

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

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

Diversification Opportunities for Voya Financial and KeyCorp

0.46

Correlation Coefficient

Voya Financial  KeyCorp

Very weak diversification

The 3 months correlation between Voya and KeyCorp is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Voya Financial and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Voya Financial 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 Voya Financial 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 has no effect on the direction of Voya Financial i.e., Voya Financial and KeyCorp go up and down completely randomly.

Pair Corralation between Voya Financial and KeyCorp

Assuming the 90 days trading horizon Voya Financial is expected to under-perform the KeyCorp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Voya Financial is 1.02 times less risky than KeyCorp. The preferred stock trades about -0.14 of its potential returns per unit of risk. The KeyCorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,475  in KeyCorp on October 26, 2024 and sell it today you would earn a total of  60.00  from holding KeyCorp or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Voya Financial  vs.  KeyCorp

Voya Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Voya Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KeyCorp

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Voya Financial and KeyCorp

The main advantage of trading using opposite Voya Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Voya Financial 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 Voya Financial and KeyCorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.