Correlation Between KeyCorp and Washington Trust
Can any of the company-specific risk be diversified away by investing in both KeyCorp and Washington Trust 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 Washington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KeyCorp and Washington Trust Bancorp, you can compare the effects of market volatilities on KeyCorp and Washington Trust 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 Washington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and Washington Trust.
Diversification Opportunities for KeyCorp and Washington Trust
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KeyCorp and Washington is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Washington Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Trust 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 Washington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Trust Bancorp has no effect on the direction of KeyCorp i.e., KeyCorp and Washington Trust go up and down completely randomly.
Pair Corralation between KeyCorp and Washington Trust
Assuming the 90 days trading horizon KeyCorp is expected to generate 4.46 times less return on investment than Washington Trust. But when comparing it to its historical volatility, KeyCorp is 4.19 times less risky than Washington Trust. It trades about 0.08 of its potential returns per unit of risk. Washington Trust Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3,511 in Washington Trust Bancorp on August 30, 2024 and sell it today you would earn a total of 221.00 from holding Washington Trust Bancorp or generate 6.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KeyCorp vs. Washington Trust Bancorp
Performance |
| Timeline |
| KeyCorp |
| Washington Trust Bancorp |
KeyCorp and Washington Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KeyCorp and Washington Trust
The main advantage of trading using opposite KeyCorp and Washington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KeyCorp position performs unexpectedly, Washington Trust 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 Washington Trust will offset losses from the drop in Washington Trust's long position.The idea behind KeyCorp and Washington Trust 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.| Washington Trust vs. Univest Pennsylvania | Washington Trust vs. Waterstone Financial | Washington Trust vs. Mid Penn Bancorp | Washington Trust vs. ST 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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