Correlation Between FXP and KEY
Can any of the company-specific risk be diversified away by investing in both FXP and KEY 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 FXP and KEY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FXP and KEY, you can compare the effects of market volatilities on FXP and KEY 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 FXP with a short position of KEY. Check out your portfolio center. Please also check ongoing floating volatility patterns of FXP and KEY.
Diversification Opportunities for FXP and KEY
Pay attention - limited upside
The 3 months correlation between FXP and KEY is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding FXP and KEY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEY and FXP 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 FXP are associated (or correlated) with KEY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEY has no effect on the direction of FXP i.e., FXP and KEY go up and down completely randomly.
Pair Corralation between FXP and KEY
If you would invest 0.33 in KEY on August 25, 2024 and sell it today you would earn a total of 0.01 from holding KEY or generate 4.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 4.55% |
| Values | Daily Returns |
FXP vs. KEY
Performance |
| Timeline |
| FXP |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| KEY |
FXP and KEY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FXP and KEY
The main advantage of trading using opposite FXP and KEY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FXP position performs unexpectedly, KEY 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 KEY will offset losses from the drop in KEY's long position.The idea behind FXP and KEY 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.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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