Correlation Between Advanced Medical and KENNAMETAL INC

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

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

Diversification Opportunities for Advanced Medical and KENNAMETAL INC

0.16

Correlation Coefficient

Advanced Medical  KENNAMETAL INC

Average diversification

The 3 months correlation between Advanced and KENNAMETAL is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC and Advanced Medical 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 Advanced Medical Solutions 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 Advanced Medical i.e., Advanced Medical and KENNAMETAL INC go up and down completely randomly.

Pair Corralation between Advanced Medical and KENNAMETAL INC

Assuming the 90 days trading horizon Advanced Medical Solutions is expected to under-perform the KENNAMETAL INC. But the stock apears to be less risky and, when comparing its historical volatility, Advanced Medical Solutions is 1.09 times less risky than KENNAMETAL INC. The stock trades about -0.1 of its potential returns per unit of risk. The KENNAMETAL INC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,343  in KENNAMETAL INC on October 6, 2024 and sell it today you would lose (43.00) from holding KENNAMETAL INC or give up 1.84% of portfolio value over 90 days.

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

Advanced Medical Solutions  vs.  KENNAMETAL INC

Advanced Medical Sol

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Advanced Medical is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

KENNAMETAL INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Advanced Medical and KENNAMETAL INC

The main advantage of trading using opposite Advanced Medical and KENNAMETAL INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advanced Medical 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 Advanced Medical Solutions 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.