Correlation Between KEY and Orca

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

By analyzing existing cross correlation between KEY and Orca, you can compare the effects of market volatilities on KEY and Orca 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 KEY with a short position of Orca. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEY and Orca.

Diversification Opportunities for KEY and Orca

0.6

Correlation Coefficient

KEY  Orca

Poor diversification

The 3 months correlation between KEY and Orca is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding KEY and Orca in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orca and KEY 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 KEY are associated (or correlated) with Orca. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orca has no effect on the direction of KEY i.e., KEY and Orca go up and down completely randomly.

Pair Corralation between KEY and Orca

Assuming the 90 days trading horizon KEY is expected to generate 1.3 times more return on investment than Orca. However, KEY is 1.3 times more volatile than Orca. It trades about 0.01 of its potential returns per unit of risk. Orca is currently generating about 0.01 per unit of risk. If you would invest  0.05  in KEY on May 2, 2025 and sell it today you would lose (0.01) from holding KEY or give up 13.13% of portfolio value over 90 days.

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

KEY  vs.  Orca

KEY

Risk-Adjusted Performance

Very Weak

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

Orca

Risk-Adjusted Performance

Very Weak

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

Pair Trading with KEY and Orca

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

The idea behind KEY and Orca 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 Global Correlations module to find global opportunities by holding instruments from different markets.