Correlation Between KEY and CLO
Can any of the company-specific risk be diversified away by investing in both KEY and CLO 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 KEY and CLO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KEY and CLO, you can compare the effects of market volatilities on KEY and CLO 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 KEY with a short position of CLO. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEY and CLO.
Diversification Opportunities for KEY and CLO
Average diversification
The 3 months correlation between KEY and CLO is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KEY and CLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLO and KEY 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 KEY are associated (or correlated) with CLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLO has no effect on the direction of KEY i.e., KEY and CLO go up and down completely randomly.
Pair Corralation between KEY and CLO
Assuming the 90 days trading horizon KEY is expected to under-perform the CLO. But the crypto coin apears to be less risky and, when comparing its historical volatility, KEY is 24.63 times less risky than CLO. The crypto coin trades about -0.11 of its potential returns per unit of risk. The CLO is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 0.07 in CLO on September 4, 2024 and sell it today you would lose (0.07) from holding CLO or give up 91.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KEY vs. CLO
Performance |
| Timeline |
| KEY |
| CLO |
KEY and CLO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KEY and CLO
The main advantage of trading using opposite KEY and CLO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEY position performs unexpectedly, CLO 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 CLO will offset losses from the drop in CLO's long position.The idea behind KEY and CLO 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |