Correlation Between KeyCorp and ECB Bancorp

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

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

Diversification Opportunities for KeyCorp and ECB Bancorp

0.12

Correlation Coefficient

KeyCorp  ECB Bancorp

Average diversification

The 3 months correlation between KeyCorp and ECB is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and ECB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECB 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 ECB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECB Bancorp has no effect on the direction of KeyCorp i.e., KeyCorp and ECB Bancorp go up and down completely randomly.

Pair Corralation between KeyCorp and ECB Bancorp

Assuming the 90 days trading horizon KeyCorp is expected to under-perform the ECB Bancorp. But the preferred stock apears to be less risky and, when comparing its historical volatility, KeyCorp is 1.12 times less risky than ECB Bancorp. The preferred stock trades about -0.32 of its potential returns per unit of risk. The ECB Bancorp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,490  in ECB Bancorp on September 27, 2024 and sell it today you would earn a total of  20.00  from holding ECB Bancorp or generate 1.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

KeyCorp  vs.  ECB Bancorp

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 latest weak performance, the Preferred Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

ECB Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ECB Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, ECB Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KeyCorp and ECB Bancorp

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

The idea behind KeyCorp and ECB 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.

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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.