Correlation Between KeyCorp and NorthWestern

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Can any of the company-specific risk be diversified away by investing in both KeyCorp and NorthWestern 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 NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KeyCorp and NorthWestern, you can compare the effects of market volatilities on KeyCorp and NorthWestern 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 NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and NorthWestern.

Diversification Opportunities for KeyCorp and NorthWestern

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between KeyCorp and NorthWestern is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern 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 NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of KeyCorp i.e., KeyCorp and NorthWestern go up and down completely randomly.

Pair Corralation between KeyCorp and NorthWestern

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the NorthWestern. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 2.52 times less risky than NorthWestern. The preferred stock trades about -0.03 of its potential returns per unit of risk. The NorthWestern is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5,534  in NorthWestern on August 27, 2024 and sell it today you would earn a total of  141.00  from holding NorthWestern or generate 2.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

KeyCorp  vs.  NorthWestern

 Performance 
       Timeline  
KeyCorp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.
NorthWestern 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NorthWestern are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, NorthWestern may actually be approaching a critical reversion point that can send shares even higher in December 2024.

KeyCorp and NorthWestern Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KeyCorp and NorthWestern

The main advantage of trading using opposite KeyCorp and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KeyCorp position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.
The idea behind KeyCorp and NorthWestern 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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