Correlation Between Washington Mutual and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Washington Mutual 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 Mutual and KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Washington Mutual Investors and KeyCorp, you can compare the effects of market volatilities on Washington Mutual 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 Mutual with a short position of KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Washington Mutual and KeyCorp.
Diversification Opportunities for Washington Mutual and KeyCorp
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Washington and KeyCorp is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Washington Mutual Investors and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Washington Mutual 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 Mutual Investors 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 Mutual i.e., Washington Mutual and KeyCorp go up and down completely randomly.
Pair Corralation between Washington Mutual and KeyCorp
Assuming the 90 days horizon Washington Mutual is expected to generate 3.9 times less return on investment than KeyCorp. But when comparing it to its historical volatility, Washington Mutual Investors is 2.61 times less risky than KeyCorp. It trades about 0.05 of its potential returns per unit of risk. KeyCorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,210 in KeyCorp on November 4, 2024 and sell it today you would earn a total of 511.00 from holding KeyCorp or generate 42.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Washington Mutual Investors vs. KeyCorp
Performance |
| Timeline |
| Washington Mutual |
| KeyCorp |
Washington Mutual and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Washington Mutual and KeyCorp
The main advantage of trading using opposite Washington Mutual and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Washington Mutual 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.| Washington Mutual vs. Neuberger Berman Real | Washington Mutual vs. Dunham Real Estate | Washington Mutual vs. Real Estate Ultrasector | Washington Mutual vs. Texton Property |
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Check out your portfolio center.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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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