Correlation Between Sea and KeyCorp
Can any of the company-specific risk be diversified away by investing in both Sea 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 Sea and KeyCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sea and KeyCorp, you can compare the effects of market volatilities on Sea 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 Sea with a short position of KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sea and KeyCorp.
Diversification Opportunities for Sea and KeyCorp
Average diversification
The 3 months correlation between Sea and KeyCorp is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Sea and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Sea 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 Sea 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 Sea i.e., Sea and KeyCorp go up and down completely randomly.
Pair Corralation between Sea and KeyCorp
Allowing for the 90-day total investment horizon Sea is expected to generate 2.84 times more return on investment than KeyCorp. However, Sea is 2.84 times more volatile than KeyCorp. It trades about 0.18 of its potential returns per unit of risk. KeyCorp is currently generating about 0.07 per unit of risk. If you would invest 6,935 in Sea on August 31, 2024 and sell it today you would earn a total of 4,445 from holding Sea or generate 64.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sea vs. KeyCorp
Performance |
| Timeline |
| Sea |
| KeyCorp |
Sea and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sea and KeyCorp
The main advantage of trading using opposite Sea and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sea 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.The idea behind Sea and KeyCorp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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