Correlation Between Drilling Tools and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Drilling Tools 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 Drilling Tools and KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Drilling Tools International and KeyCorp, you can compare the effects of market volatilities on Drilling Tools 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 Drilling Tools with a short position of KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Drilling Tools and KeyCorp.
Diversification Opportunities for Drilling Tools and KeyCorp
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Drilling and KeyCorp is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Drilling Tools International and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Drilling Tools 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 Drilling Tools International 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 Drilling Tools i.e., Drilling Tools and KeyCorp go up and down completely randomly.
Pair Corralation between Drilling Tools and KeyCorp
Considering the 90-day investment horizon Drilling Tools International is expected to under-perform the KeyCorp. In addition to that, Drilling Tools is 1.79 times more volatile than KeyCorp. It trades about -0.04 of its total potential returns per unit of risk. KeyCorp is currently generating about 0.03 per unit of volatility. If you would invest 2,130 in KeyCorp on September 3, 2024 and sell it today you would earn a total of 359.00 from holding KeyCorp or generate 16.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Drilling Tools International vs. KeyCorp
Performance |
| Timeline |
| Drilling Tools Inter |
| KeyCorp |
Drilling Tools and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Drilling Tools and KeyCorp
The main advantage of trading using opposite Drilling Tools and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Drilling Tools 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.| Drilling Tools vs. Verde Clean Fuels | Drilling Tools vs. Semtech | Drilling Tools vs. NextNav Warrant | Drilling Tools vs. Nasdaq Inc |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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