Correlation Between Hillman Solutions and Kennametal

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

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

Diversification Opportunities for Hillman Solutions and Kennametal

0.81

Correlation Coefficient

Hillman Solutions  Kennametal

Very poor diversification

The 3 months correlation between Hillman and Kennametal is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hillman Solutions Corp and Kennametal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennametal and Hillman Solutions 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 Hillman Solutions Corp are associated (or correlated) with Kennametal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennametal has no effect on the direction of Hillman Solutions i.e., Hillman Solutions and Kennametal go up and down completely randomly.

Pair Corralation between Hillman Solutions and Kennametal

Given the investment horizon of 90 days Hillman Solutions Corp is expected to generate 1.27 times more return on investment than Kennametal. However, Hillman Solutions is 1.27 times more volatile than Kennametal. It trades about -0.1 of its potential returns per unit of risk. Kennametal is currently generating about -0.29 per unit of risk. If you would invest  1,140  in Hillman Solutions Corp on November 28, 2024 and sell it today you would lose (126.00) from holding Hillman Solutions Corp or give up 11.05% of portfolio value over 90 days.

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

Hillman Solutions Corp  vs.  Kennametal

Hillman Solutions Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hillman Solutions Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Kennametal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kennametal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hillman Solutions and Kennametal

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

The idea behind Hillman Solutions Corp and Kennametal 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.