Correlation Between Washington Federal and KeyCorp

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

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

Diversification Opportunities for Washington Federal and KeyCorp

0.58

Correlation Coefficient

Washington Federal  KeyCorp

Very weak diversification

The 3 months correlation between Washington and KeyCorp is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Washington Federal and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Washington Federal 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 Washington Federal 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 Washington Federal i.e., Washington Federal and KeyCorp go up and down completely randomly.

Pair Corralation between Washington Federal and KeyCorp

Assuming the 90 days horizon Washington Federal is expected to generate 1.49 times more return on investment than KeyCorp. However, Washington Federal is 1.49 times more volatile than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about 0.04 per unit of risk. If you would invest  1,738  in Washington Federal on September 4, 2024 and sell it today you would earn a total of  45.00  from holding Washington Federal or generate 2.59% return on investment over 90 days.

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

Washington Federal  vs.  KeyCorp

Washington Federal

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Washington Federal are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Washington Federal is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

KeyCorp

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) 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 Washington Federal and KeyCorp

The main advantage of trading using opposite Washington Federal and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Federal 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 Washington Federal 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.