Correlation Between Altlayer and KEY

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

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

Diversification Opportunities for Altlayer and KEY

0.75

Correlation Coefficient

Altlayer  KEY

Poor diversification

The 3 months correlation between Altlayer and KEY is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Altlayer and KEY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEY and Altlayer 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 Altlayer are associated (or correlated) with KEY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEY has no effect on the direction of Altlayer i.e., Altlayer and KEY go up and down completely randomly.

Pair Corralation between Altlayer and KEY

Assuming the 90 days trading horizon Altlayer is expected to generate 1.66 times less return on investment than KEY. But when comparing it to its historical volatility, Altlayer is 1.18 times less risky than KEY. It trades about 0.07 of its potential returns per unit of risk. KEY is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.54  in KEY on February 7, 2024 and sell it today you would earn a total of  0.17  from holding KEY or generate 31.45% return on investment over 90 days.

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

Altlayer  vs.  KEY

Altlayer

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altlayer are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Altlayer exhibited solid returns over the last few months and may actually be approaching a breakup point.

KEY

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KEY are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, KEY exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Altlayer and KEY

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

The idea behind Altlayer and KEY 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.

Check out your portfolio center.

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.