Correlation Between KeyCorp and Blueharbor Bank

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

By analyzing existing cross correlation between KeyCorp and Blueharbor Bank, you can compare the effects of market volatilities on KeyCorp and Blueharbor Bank 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 Blueharbor Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of KeyCorp and Blueharbor Bank.

Diversification Opportunities for KeyCorp and Blueharbor Bank

0.06

Correlation Coefficient

KeyCorp  Blueharbor Bank

Significant diversification

The 3 months correlation between KeyCorp and Blueharbor is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Blueharbor Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueharbor Bank 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 Blueharbor Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueharbor Bank has no effect on the direction of KeyCorp i.e., KeyCorp and Blueharbor Bank go up and down completely randomly.

Pair Corralation between KeyCorp and Blueharbor Bank

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the Blueharbor Bank. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.35 times less risky than Blueharbor Bank. The preferred stock trades about -0.08 of its potential returns per unit of risk. The Blueharbor Bank is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,025  in Blueharbor Bank on March 19, 2024 and sell it today you would lose (25.00) from holding Blueharbor Bank or give up 1.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.77%
Values	Daily Returns

KeyCorp  vs.  Blueharbor Bank

KeyCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KeyCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, KeyCorp is not utilizing all of its potentials. The new stock price mess, may contribute to short-term losses for the institutional investors.

Blueharbor Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blueharbor Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Blueharbor Bank is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KeyCorp and Blueharbor Bank

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

The idea behind KeyCorp and Blueharbor Bank 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.