Correlation Between Citizens Financial and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Citizens 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 Citizens Financial and KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citizens Financial Group and KeyCorp, you can compare the effects of market volatilities on Citizens 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 Citizens Financial with a short position of KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citizens Financial and KeyCorp.
Diversification Opportunities for Citizens Financial and KeyCorp
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Citizens and KeyCorp is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Citizens Financial Group and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Citizens 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 Citizens Financial Group 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 Citizens Financial i.e., Citizens Financial and KeyCorp go up and down completely randomly.
Pair Corralation between Citizens Financial and KeyCorp
Assuming the 90 days trading horizon Citizens Financial is expected to generate 1.25 times less return on investment than KeyCorp. But when comparing it to its historical volatility, Citizens Financial Group is 1.32 times less risky than KeyCorp. It trades about 0.03 of its potential returns per unit of risk. KeyCorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,039 in KeyCorp on August 30, 2024 and sell it today you would earn a total of 296.00 from holding KeyCorp or generate 14.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Citizens Financial Group vs. KeyCorp
Performance |
| Timeline |
| Citizens Financial |
| KeyCorp |
Citizens Financial and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citizens Financial and KeyCorp
The main advantage of trading using opposite Citizens Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citizens 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.| Citizens Financial vs. Capital One Financial | Citizens Financial vs. Capital One Financial | Citizens Financial vs. Bank of America | Citizens Financial vs. KeyCorp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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