Correlation Between KENNAMETAL INC and Ubisoft Entertainment

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

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

Diversification Opportunities for KENNAMETAL INC and Ubisoft Entertainment

0.04

Correlation Coefficient

KENNAMETAL INC  Ubisoft Entertainment

Significant diversification

The 3 months correlation between KENNAMETAL and Ubisoft is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and Ubisoft Entertainment SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ubisoft Entertainment 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 Ubisoft Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ubisoft Entertainment has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and Ubisoft Entertainment go up and down completely randomly.

Pair Corralation between KENNAMETAL INC and Ubisoft Entertainment

Assuming the 90 days trading horizon KENNAMETAL INC is expected to under-perform the Ubisoft Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, KENNAMETAL INC is 3.05 times less risky than Ubisoft Entertainment. The stock trades about -0.55 of its potential returns per unit of risk. The Ubisoft Entertainment SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,248  in Ubisoft Entertainment SA on September 30, 2024 and sell it today you would earn a total of  29.00  from holding Ubisoft Entertainment SA or generate 2.32% return on investment over 90 days.

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

KENNAMETAL INC  vs.  Ubisoft Entertainment SA

KENNAMETAL INC

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, KENNAMETAL INC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ubisoft Entertainment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ubisoft Entertainment SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ubisoft Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KENNAMETAL INC and Ubisoft Entertainment

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

The idea behind KENNAMETAL INC and Ubisoft Entertainment SA 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.