Correlation Between KENNAMETAL INC and PLAY2CHILL

Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and PLAY2CHILL 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 PLAY2CHILL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KENNAMETAL INC and PLAY2CHILL SA ZY, you can compare the effects of market volatilities on KENNAMETAL INC and PLAY2CHILL 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 PLAY2CHILL. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and PLAY2CHILL.

Diversification Opportunities for KENNAMETAL INC and PLAY2CHILL

0.14

Correlation Coefficient

KENNAMETAL INC  PLAY2CHILL

Average diversification

The 3 months correlation between KENNAMETAL and PLAY2CHILL is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and PLAY2CHILL SA ZY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAY2CHILL SA ZY 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 PLAY2CHILL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAY2CHILL SA ZY has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and PLAY2CHILL go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and PLAY2CHILL

Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.01 times more return on investment than PLAY2CHILL. However, KENNAMETAL INC is 1.01 times more volatile than PLAY2CHILL SA ZY. It trades about 0.14 of its potential returns per unit of risk. PLAY2CHILL SA ZY is currently generating about 0.06 per unit of risk. If you would invest  2,223  in KENNAMETAL INC on September 5, 2024 and sell it today you would earn a total of  537.00  from holding KENNAMETAL INC or generate 24.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

KENNAMETAL INC  vs.  PLAY2CHILL SA ZY

KENNAMETAL INC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, KENNAMETAL INC exhibited solid returns over the last few months and may actually be approaching a breakup point.

PLAY2CHILL SA ZY

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PLAY2CHILL SA ZY are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PLAY2CHILL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KENNAMETAL INC and PLAY2CHILL

The main advantage of trading using opposite KENNAMETAL INC and PLAY2CHILL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, PLAY2CHILL 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 PLAY2CHILL will offset losses from the drop in PLAY2CHILL's long position.

The idea behind KENNAMETAL INC and PLAY2CHILL SA ZY 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.