Correlation Between KeyCorp and Enterprise Bancorp

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

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

Diversification Opportunities for KeyCorp and Enterprise Bancorp

0.69

Correlation Coefficient

KeyCorp  Enterprise Bancorp

Poor diversification

The 3 months correlation between KeyCorp and Enterprise is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and Enterprise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Bancorp 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 Enterprise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Bancorp has no effect on the direction of KeyCorp i.e., KeyCorp and Enterprise Bancorp go up and down completely randomly.

Pair Corralation between KeyCorp and Enterprise Bancorp

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the Enterprise Bancorp. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 3.3 times less risky than Enterprise Bancorp. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Enterprise Bancorp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,894  in Enterprise Bancorp on March 20, 2025 and sell it today you would lose (45.00) from holding Enterprise Bancorp or give up 1.16% of portfolio value over 90 days.

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

KeyCorp  vs.  Enterprise Bancorp

KeyCorp

Risk-Adjusted Performance

Very Weak

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

Enterprise Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enterprise Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enterprise Bancorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KeyCorp and Enterprise Bancorp

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

The idea behind KeyCorp and Enterprise Bancorp 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 CEOs Directory module to screen CEOs from public companies around the world.