Correlation Between KeyCorp and ChoiceOne Financial

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

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

Diversification Opportunities for KeyCorp and ChoiceOne Financial

0.79

Correlation Coefficient

KeyCorp  ChoiceOne Financial

Poor diversification

The 3 months correlation between KeyCorp and ChoiceOne is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and ChoiceOne Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChoiceOne Financial 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 ChoiceOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChoiceOne Financial has no effect on the direction of KeyCorp i.e., KeyCorp and ChoiceOne Financial go up and down completely randomly.

Pair Corralation between KeyCorp and ChoiceOne Financial

Assuming the 90 days trading horizon KeyCorp is expected to generate 2.05 times less return on investment than ChoiceOne Financial. But when comparing it to its historical volatility, KeyCorp is 1.94 times less risky than ChoiceOne Financial. It trades about 0.07 of its potential returns per unit of risk. ChoiceOne Financial Services is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,956  in ChoiceOne Financial Services on August 15, 2024 and sell it today you would earn a total of  1,631  from holding ChoiceOne Financial Services or generate 83.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.73%
Values	Daily Returns

KeyCorp  vs.  ChoiceOne Financial Services

KeyCorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, KeyCorp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

ChoiceOne Financial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ChoiceOne Financial Services are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, ChoiceOne Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KeyCorp and ChoiceOne Financial

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

The idea behind KeyCorp and ChoiceOne Financial Services 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.