Correlation Between KENNAMETAL INC and PPHE HOTEL

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

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

Diversification Opportunities for KENNAMETAL INC and PPHE HOTEL

0.01

Correlation Coefficient

KENNAMETAL INC  PPHE HOTEL

Significant diversification

The 3 months correlation between KENNAMETAL and PPHE is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and PPHE HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE HOTEL GROUP and KENNAMETAL INC 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 KENNAMETAL INC are associated (or correlated) with PPHE HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE HOTEL GROUP has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and PPHE HOTEL go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and PPHE HOTEL

Assuming the 90 days trading horizon KENNAMETAL INC is expected to under-perform the PPHE HOTEL. But the stock apears to be less risky and, when comparing its historical volatility, KENNAMETAL INC is 1.3 times less risky than PPHE HOTEL. The stock trades about -0.22 of its potential returns per unit of risk. The PPHE HOTEL GROUP is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,380  in PPHE HOTEL GROUP on September 15, 2024 and sell it today you would earn a total of  190.00  from holding PPHE HOTEL GROUP or generate 13.77% return on investment over 90 days.

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

KENNAMETAL INC  vs.  PPHE HOTEL GROUP

KENNAMETAL INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, KENNAMETAL INC exhibited solid returns over the last few months and may actually be approaching a breakup point.

PPHE HOTEL GROUP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, PPHE HOTEL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KENNAMETAL INC and PPHE HOTEL

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

The idea behind KENNAMETAL INC and PPHE HOTEL GROUP 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.