Correlation Between KENNAMETAL INC and RYOHIN UNSPADR/1

Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and RYOHIN UNSPADR/1 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 RYOHIN UNSPADR/1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KENNAMETAL INC and RYOHIN UNSPADR1, you can compare the effects of market volatilities on KENNAMETAL INC and RYOHIN UNSPADR/1 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 RYOHIN UNSPADR/1. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and RYOHIN UNSPADR/1.

Diversification Opportunities for KENNAMETAL INC and RYOHIN UNSPADR/1

0.4

Correlation Coefficient

KENNAMETAL INC  RYOHIN UNSPADR/1

Very weak diversification

The 3 months correlation between KENNAMETAL and RYOHIN is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and RYOHIN UNSPADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RYOHIN UNSPADR/1 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 RYOHIN UNSPADR/1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RYOHIN UNSPADR/1 has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and RYOHIN UNSPADR/1 go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and RYOHIN UNSPADR/1

Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 11.16 times less return on investment than RYOHIN UNSPADR/1. But when comparing it to its historical volatility, KENNAMETAL INC is 1.16 times less risky than RYOHIN UNSPADR/1. It trades about 0.01 of its potential returns per unit of risk. RYOHIN UNSPADR1 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  870.00  in RYOHIN UNSPADR1 on October 4, 2024 and sell it today you would earn a total of  1,290  from holding RYOHIN UNSPADR1 or generate 148.28% return on investment over 90 days.

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

KENNAMETAL INC  vs.  RYOHIN UNSPADR1

KENNAMETAL INC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

RYOHIN UNSPADR/1

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RYOHIN UNSPADR1 are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, RYOHIN UNSPADR/1 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KENNAMETAL INC and RYOHIN UNSPADR/1

The main advantage of trading using opposite KENNAMETAL INC and RYOHIN UNSPADR/1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, RYOHIN UNSPADR/1 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 RYOHIN UNSPADR/1 will offset losses from the drop in RYOHIN UNSPADR/1's long position.

The idea behind KENNAMETAL INC and RYOHIN UNSPADR1 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.