Correlation Between KENNAMETAL INC and Antofagasta Plc

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

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

Diversification Opportunities for KENNAMETAL INC and Antofagasta Plc

-0.73

Correlation Coefficient

KENNAMETAL INC  Antofagasta Plc

Pay attention - limited upside

The 3 months correlation between KENNAMETAL and Antofagasta is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and Antofagasta plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antofagasta plc 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 Antofagasta Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antofagasta plc has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and Antofagasta Plc go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and Antofagasta Plc

Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.18 times less return on investment than Antofagasta Plc. But when comparing it to its historical volatility, KENNAMETAL INC is 1.22 times less risky than Antofagasta Plc. It trades about 0.03 of its potential returns per unit of risk. Antofagasta plc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,683  in Antofagasta plc on September 21, 2024 and sell it today you would earn a total of  273.00  from holding Antofagasta plc or generate 16.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

KENNAMETAL INC  vs.  Antofagasta plc

KENNAMETAL INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, KENNAMETAL INC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Antofagasta plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antofagasta plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with KENNAMETAL INC and Antofagasta Plc

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

The idea behind KENNAMETAL INC and Antofagasta plc 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.