Correlation Between KENNAMETAL INC and Asahi Group

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

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

Diversification Opportunities for KENNAMETAL INC and Asahi Group

-0.48

Correlation Coefficient

KENNAMETAL INC  Asahi Group

Very good diversification

The 3 months correlation between KENNAMETAL and Asahi is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and Asahi Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asahi Group Holdings 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 Asahi Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asahi Group Holdings has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and Asahi Group go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and Asahi Group

Assuming the 90 days trading horizon KENNAMETAL INC is expected to under-perform the Asahi Group. But the stock apears to be less risky and, when comparing its historical volatility, KENNAMETAL INC is 1.46 times less risky than Asahi Group. The stock trades about -0.32 of its potential returns per unit of risk. The Asahi Group Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,029  in Asahi Group Holdings on December 3, 2024 and sell it today you would earn a total of  169.00  from holding Asahi Group Holdings or generate 16.42% return on investment over 90 days.

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

KENNAMETAL INC  vs.  Asahi Group Holdings

KENNAMETAL INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days KENNAMETAL INC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Asahi Group Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asahi Group Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Asahi Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KENNAMETAL INC and Asahi Group

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

The idea behind KENNAMETAL INC and Asahi Group Holdings 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.