Correlation Between Regions Financial and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Regions Financial and KeyCorp 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 Regions Financial and KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regions Financial and KeyCorp, you can compare the effects of market volatilities on Regions Financial and KeyCorp 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 Regions Financial with a short position of KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and KeyCorp.
Diversification Opportunities for Regions Financial and KeyCorp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Regions and KeyCorp is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Regions Financial 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 Regions Financial are associated (or correlated) with KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Regions Financial i.e., Regions Financial and KeyCorp go up and down completely randomly.
Pair Corralation between Regions Financial and KeyCorp
Assuming the 90 days horizon Regions Financial is expected to generate 7.11 times less return on investment than KeyCorp. But when comparing it to its historical volatility, Regions Financial is 1.45 times less risky than KeyCorp. It trades about 0.01 of its potential returns per unit of risk. KeyCorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 2,290 in KeyCorp on August 27, 2024 and sell it today you would earn a total of 24.00 from holding KeyCorp or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regions Financial vs. KeyCorp
Performance |
| Timeline |
| Regions Financial |
| KeyCorp |
Regions Financial and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regions Financial and KeyCorp
The main advantage of trading using opposite Regions Financial and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial position performs unexpectedly, KeyCorp 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 KeyCorp will offset losses from the drop in KeyCorp's long position.| Regions Financial vs. Capital One Financial | Regions Financial vs. Capital One Financial | Regions Financial 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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