Correlation Between Kenmec Mechanical and AVY Precision

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

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

Diversification Opportunities for Kenmec Mechanical and AVY Precision

0.28

Correlation Coefficient

Kenmec Mechanical  AVY Precision

Modest diversification

The 3 months correlation between Kenmec and AVY is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kenmec Mechanical Engineering and AVY Precision Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AVY Precision Technology and Kenmec Mechanical 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 Kenmec Mechanical Engineering are associated (or correlated) with AVY Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AVY Precision Technology has no effect on the direction of Kenmec Mechanical i.e., Kenmec Mechanical and AVY Precision go up and down completely randomly.

Pair Corralation between Kenmec Mechanical and AVY Precision

Assuming the 90 days trading horizon Kenmec Mechanical is expected to generate 1.82 times less return on investment than AVY Precision. But when comparing it to its historical volatility, Kenmec Mechanical Engineering is 2.02 times less risky than AVY Precision. It trades about 0.21 of its potential returns per unit of risk. AVY Precision Technology is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,205  in AVY Precision Technology on December 5, 2024 and sell it today you would earn a total of  395.00  from holding AVY Precision Technology or generate 12.32% return on investment over 90 days.

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

Kenmec Mechanical Engineering  vs.  AVY Precision Technology

Kenmec Mechanical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kenmec Mechanical Engineering are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kenmec Mechanical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

AVY Precision Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AVY Precision Technology are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AVY Precision showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kenmec Mechanical and AVY Precision

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

The idea behind Kenmec Mechanical Engineering and AVY Precision Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.