Correlation Between KeyCorp and First Commonwealth

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

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

Diversification Opportunities for KeyCorp and First Commonwealth

0.7

Correlation Coefficient

KeyCorp  First Commonwealth

Poor diversification

The 3 months correlation between KeyCorp and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KeyCorp and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth 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 First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of KeyCorp i.e., KeyCorp and First Commonwealth go up and down completely randomly.

Pair Corralation between KeyCorp and First Commonwealth

Assuming the 90 days trading horizon KeyCorp is expected to generate 2.12 times less return on investment than First Commonwealth. But when comparing it to its historical volatility, KeyCorp is 2.98 times less risky than First Commonwealth. It trades about 0.1 of its potential returns per unit of risk. First Commonwealth Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,543  in First Commonwealth Financial on April 29, 2025 and sell it today you would earn a total of  88.00  from holding First Commonwealth Financial or generate 5.7% return on investment over 90 days.

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

KeyCorp  vs.  First Commonwealth Financial

KeyCorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, KeyCorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First Commonwealth

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Commonwealth Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, First Commonwealth is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KeyCorp and First Commonwealth

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

The idea behind KeyCorp and First Commonwealth Financial 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.