Correlation Between KeyCorp and Regions Financial
Can any of the company-specific risk be diversified away by investing in both KeyCorp and Regions Financial 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 Regions Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KeyCorp and Regions Financial, you can compare the effects of market volatilities on KeyCorp and Regions Financial 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 Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and Regions Financial.
Diversification Opportunities for KeyCorp and Regions Financial
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KeyCorp and Regions is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of KeyCorp i.e., KeyCorp and Regions Financial go up and down completely randomly.
Pair Corralation between KeyCorp and Regions Financial
Assuming the 90 days trading horizon KeyCorp is expected to generate 1.12 times more return on investment than Regions Financial. However, KeyCorp is 1.12 times more volatile than Regions Financial. It trades about 0.05 of its potential returns per unit of risk. Regions Financial is currently generating about 0.05 per unit of risk. If you would invest 1,838 in KeyCorp on September 12, 2024 and sell it today you would earn a total of 409.00 from holding KeyCorp or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KeyCorp vs. Regions Financial
Performance |
| Timeline |
| KeyCorp |
| Regions Financial |
KeyCorp and Regions Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KeyCorp and Regions Financial
The main advantage of trading using opposite KeyCorp and Regions Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KeyCorp position performs unexpectedly, Regions Financial 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 Regions Financial will offset losses from the drop in Regions Financial's long position.The idea behind KeyCorp and Regions Financial 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.| Regions Financial vs. Morgan Stanley | Regions Financial vs. KeyCorp | Regions Financial vs. KeyCorp | Regions Financial vs. KeyCorp |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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