Correlation Between KENNAMETAL INC and VITEC SOFTWARE

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

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

Diversification Opportunities for KENNAMETAL INC and VITEC SOFTWARE

-0.33

Correlation Coefficient

KENNAMETAL INC  VITEC SOFTWARE

Very good diversification

The 3 months correlation between KENNAMETAL and VITEC is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE GROUP 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 VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and VITEC SOFTWARE go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and VITEC SOFTWARE

Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.13 times more return on investment than VITEC SOFTWARE. However, KENNAMETAL INC is 1.13 times more volatile than VITEC SOFTWARE GROUP. It trades about 0.09 of its potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about 0.03 per unit of risk. If you would invest  2,243  in KENNAMETAL INC on September 15, 2024 and sell it today you would earn a total of  317.00  from holding KENNAMETAL INC or generate 14.13% return on investment over 90 days.

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

KENNAMETAL INC  vs.  VITEC SOFTWARE GROUP

KENNAMETAL INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, KENNAMETAL INC exhibited solid returns over the last few months and may actually be approaching a breakup point.

VITEC SOFTWARE GROUP

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VITEC SOFTWARE GROUP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, VITEC SOFTWARE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KENNAMETAL INC and VITEC SOFTWARE

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

The idea behind KENNAMETAL INC and VITEC SOFTWARE GROUP 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.