Correlation Between KENNAMETAL INC and TYSON FOODS

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

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

Diversification Opportunities for KENNAMETAL INC and TYSON FOODS

0.84

Correlation Coefficient

KENNAMETAL INC  TYSON FOODS

Very poor diversification

The 3 months correlation between KENNAMETAL and TYSON is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and TYSON FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYSON FOODS A 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 TYSON FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TYSON FOODS A has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and TYSON FOODS go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and TYSON FOODS

Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.5 times more return on investment than TYSON FOODS. However, KENNAMETAL INC is 1.5 times more volatile than TYSON FOODS A . It trades about -0.16 of its potential returns per unit of risk. TYSON FOODS A is currently generating about -0.31 per unit of risk. If you would invest  2,640  in KENNAMETAL INC on September 20, 2024 and sell it today you would lose (140.00) from holding KENNAMETAL INC or give up 5.3% of portfolio value over 90 days.

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

KENNAMETAL INC  vs.  TYSON FOODS A

KENNAMETAL INC

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 4 (%) 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.

TYSON FOODS A

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TYSON FOODS A are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, TYSON FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KENNAMETAL INC and TYSON FOODS

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

The idea behind KENNAMETAL INC and TYSON FOODS A 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.