Correlation Between Central Pacific and KeyCorp

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

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

Diversification Opportunities for Central Pacific and KeyCorp

0.35

Correlation Coefficient

Central Pacific  KeyCorp

Weak diversification

The 3 months correlation between Central and KeyCorp is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Central Pacific Financial and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp and Central Pacific 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 Central Pacific Financial 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 Central Pacific i.e., Central Pacific and KeyCorp go up and down completely randomly.

Pair Corralation between Central Pacific and KeyCorp

Considering the 90-day investment horizon Central Pacific Financial is expected to generate 0.55 times more return on investment than KeyCorp. However, Central Pacific Financial is 1.81 times less risky than KeyCorp. It trades about -0.07 of its potential returns per unit of risk. KeyCorp is currently generating about -0.06 per unit of risk. If you would invest  2,059  in Central Pacific Financial on March 4, 2024 and sell it today you would lose (31.00) from holding Central Pacific Financial or give up 1.51% of portfolio value over 90 days.

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

Central Pacific Financial  vs.  KeyCorp

Central Pacific Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Central Pacific Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Central Pacific may actually be approaching a critical reversion point that can send shares even higher in July 2024.

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. In spite of fairly strong technical and fundamental indicators, KeyCorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Central Pacific and KeyCorp

The main advantage of trading using opposite Central Pacific and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Pacific 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 Central Pacific Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.