Correlation Between State Bank and KENNAMETAL INC

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

By analyzing existing cross correlation between State Bank of and KENNAMETAL INC, you can compare the effects of market volatilities on State Bank and KENNAMETAL INC 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 State Bank with a short position of KENNAMETAL INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of State Bank and KENNAMETAL INC.

Diversification Opportunities for State Bank and KENNAMETAL INC

0.64

Correlation Coefficient

State Bank  KENNAMETAL INC

Poor diversification

The 3 months correlation between State and KENNAMETAL is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC and State Bank 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 State Bank of are associated (or correlated) with KENNAMETAL INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENNAMETAL INC has no effect on the direction of State Bank i.e., State Bank and KENNAMETAL INC go up and down completely randomly.

Pair Corralation between State Bank and KENNAMETAL INC

Assuming the 90 days horizon State Bank of is expected to under-perform the KENNAMETAL INC. In addition to that, State Bank is 1.55 times more volatile than KENNAMETAL INC. It trades about -0.23 of its total potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.06 per unit of volatility. If you would invest  2,340  in KENNAMETAL INC on October 22, 2024 and sell it today you would earn a total of  20.00  from holding KENNAMETAL INC or generate 0.85% return on investment over 90 days.

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

State Bank of  vs.  KENNAMETAL INC

State Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, State Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KENNAMETAL INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with State Bank and KENNAMETAL INC

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

The idea behind State Bank of and KENNAMETAL INC 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.