Correlation Between Westamerica Bancorporation and KeyCorp

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

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

Diversification Opportunities for Westamerica Bancorporation and KeyCorp

0.35

Correlation Coefficient

Westamerica Bancorporation  KeyCorp

Weak diversification

The 3 months correlation between Westamerica and KeyCorp is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Westamerica Bancorp. and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Westamerica Bancorporation 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 Westamerica Bancorporation are associated (or correlated) with KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Westamerica Bancorporation i.e., Westamerica Bancorporation and KeyCorp go up and down completely randomly.

Pair Corralation between Westamerica Bancorporation and KeyCorp

Given the investment horizon of 90 days Westamerica Bancorporation is expected to under-perform the KeyCorp. In addition to that, Westamerica Bancorporation is 1.68 times more volatile than KeyCorp. It trades about -0.01 of its total potential returns per unit of risk. KeyCorp is currently generating about 0.09 per unit of volatility. If you would invest  2,140  in KeyCorp on May 7, 2025 and sell it today you would earn a total of  95.00  from holding KeyCorp or generate 4.44% return on investment over 90 days.

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

Westamerica Bancorp.  vs.  KeyCorp

Westamerica Bancorporation

Risk-Adjusted Performance

Weakest

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

KeyCorp

Risk-Adjusted Performance

Fair

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. Even with relatively steady basic indicators, KeyCorp is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Westamerica Bancorporation and KeyCorp

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

The idea behind Westamerica Bancorporation and KeyCorp 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.