Correlation Between News and KENNAMETAL INC

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

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

Diversification Opportunities for News and KENNAMETAL INC

0.9

Correlation Coefficient

News  KENNAMETAL INC

Almost no diversification

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

Pair Corralation between News and KENNAMETAL INC

Assuming the 90 days horizon News is expected to generate 2.06 times less return on investment than KENNAMETAL INC. But when comparing it to its historical volatility, News Corporation is 1.47 times less risky than KENNAMETAL INC. It trades about 0.03 of its potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,145  in KENNAMETAL INC on September 29, 2024 and sell it today you would earn a total of  195.00  from holding KENNAMETAL INC or generate 9.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.22%
Values	Daily Returns

News Corp.  vs.  KENNAMETAL INC

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 unsteady basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with News and KENNAMETAL INC

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

The idea behind News Corporation and KENNAMETAL INC 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.