Correlation Between Key Tronic and WestRock

Can any of the company-specific risk be diversified away by investing in both Key Tronic and WestRock 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 Tronic and WestRock into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Key Tronic and WestRock Co, you can compare the effects of market volatilities on Key Tronic and WestRock 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 Tronic with a short position of WestRock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Key Tronic and WestRock.

Diversification Opportunities for Key Tronic and WestRock

-0.67

Correlation Coefficient

Key Tronic  WestRock

Excellent diversification

The 3 months correlation between Key and WestRock is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Key Tronic and WestRock Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WestRock and Key Tronic 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 Tronic are associated (or correlated) with WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WestRock has no effect on the direction of Key Tronic i.e., Key Tronic and WestRock go up and down completely randomly.

Pair Corralation between Key Tronic and WestRock

Given the investment horizon of 90 days Key Tronic is expected to under-perform the WestRock. But the stock apears to be less risky and, when comparing its historical volatility, Key Tronic is 1.13 times less risky than WestRock. The stock trades about -0.06 of its potential returns per unit of risk. The WestRock Co is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  4,762  in WestRock Co on March 2, 2024 and sell it today you would earn a total of  662.00  from holding WestRock Co or generate 13.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Key Tronic  vs.  WestRock Co

Key Tronic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Key Tronic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

WestRock

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WestRock Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain basic indicators, WestRock disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Key Tronic and WestRock

The main advantage of trading using opposite Key Tronic and WestRock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Key Tronic position performs unexpectedly, WestRock 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 WestRock will offset losses from the drop in WestRock's long position.

The idea behind Key Tronic and WestRock Co 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.