Correlation Between KeyCorp and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both KeyCorp and Merchants Bancorp 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 KeyCorp and Merchants Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KeyCorp and Merchants Bancorp, you can compare the effects of market volatilities on KeyCorp and Merchants Bancorp 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 KeyCorp with a short position of Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and Merchants Bancorp.
Diversification Opportunities for KeyCorp and Merchants Bancorp
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between KeyCorp and Merchants is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp and KeyCorp 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 KeyCorp are associated (or correlated) with Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of KeyCorp i.e., KeyCorp and Merchants Bancorp go up and down completely randomly.
Pair Corralation between KeyCorp and Merchants Bancorp
Assuming the 90 days trading horizon KeyCorp is expected to generate 2.56 times more return on investment than Merchants Bancorp. However, KeyCorp is 2.56 times more volatile than Merchants Bancorp. It trades about 0.08 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.18 per unit of risk. If you would invest 1,890 in KeyCorp on September 14, 2024 and sell it today you would earn a total of 542.00 from holding KeyCorp or generate 28.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
KeyCorp vs. Merchants Bancorp
Performance |
| Timeline |
| KeyCorp |
| Merchants Bancorp |
KeyCorp and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KeyCorp and Merchants Bancorp
The main advantage of trading using opposite KeyCorp and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KeyCorp position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.The idea behind KeyCorp and Merchants Bancorp 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.| Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Capital One Financial | Merchants Bancorp vs. Bank of America |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |