Correlation Between KENNAMETAL INC and News

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

By analyzing existing cross correlation between KENNAMETAL INC and News Corporation, you can compare the effects of market volatilities on KENNAMETAL INC and News 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 News. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and News.

Diversification Opportunities for KENNAMETAL INC and News

0.9

Correlation Coefficient

KENNAMETAL INC  News

Almost no diversification

The 3 months correlation between KENNAMETAL and News is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News 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 News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and News go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and News

Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.46 times more return on investment than News. However, KENNAMETAL INC is 1.46 times more volatile than News Corporation. It trades about 0.05 of its potential returns per unit of risk. News Corporation is currently generating about 0.03 per unit of risk. If you would invest  2,086  in KENNAMETAL INC on September 30, 2024 and sell it today you would earn a total of  254.00  from holding KENNAMETAL INC or generate 12.18% return on investment over 90 days.

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

KENNAMETAL INC  vs.  News Corp.

KENNAMETAL INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

News

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KENNAMETAL INC and News

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

The idea behind KENNAMETAL INC and News Corporation 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.