Correlation Between First Interstate and KeyCorp
Can any of the company-specific risk be diversified away by investing in both First Interstate 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 First Interstate and KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Interstate BancSystem and KeyCorp, you can compare the effects of market volatilities on First Interstate 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 First Interstate with a short position of KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and KeyCorp.
Diversification Opportunities for First Interstate and KeyCorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and KeyCorp is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and First Interstate 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 First Interstate BancSystem 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 First Interstate i.e., First Interstate and KeyCorp go up and down completely randomly.
Pair Corralation between First Interstate and KeyCorp
Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 0.99 times more return on investment than KeyCorp. However, First Interstate BancSystem is 1.01 times less risky than KeyCorp. It trades about 0.12 of its potential returns per unit of risk. KeyCorp is currently generating about 0.11 per unit of risk. If you would invest 3,006 in First Interstate BancSystem on August 31, 2024 and sell it today you would earn a total of 529.00 from holding First Interstate BancSystem or generate 17.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Interstate BancSystem vs. KeyCorp
Performance |
| Timeline |
| First Interstate Ban |
| KeyCorp |
First Interstate and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Interstate and KeyCorp
The main advantage of trading using opposite First Interstate and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Interstate 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.| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
| KeyCorp vs. Western Alliance Bancorporation | KeyCorp vs. Comerica | KeyCorp vs. Truist Financial Corp | KeyCorp vs. Fifth Third Bancorp |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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