Correlation Between Entravision Communications and KENNAMETAL INC
Can any of the company-specific risk be diversified away by investing in both Entravision Communications 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 Entravision Communications and KENNAMETAL INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entravision Communications and KENNAMETAL INC, you can compare the effects of market volatilities on Entravision Communications 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 Entravision Communications with a short position of KENNAMETAL INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and KENNAMETAL INC.
Diversification Opportunities for Entravision Communications and KENNAMETAL INC
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Entravision and KENNAMETAL is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC and Entravision Communications 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 Entravision Communications 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 Entravision Communications i.e., Entravision Communications and KENNAMETAL INC go up and down completely randomly.
Pair Corralation between Entravision Communications and KENNAMETAL INC
Assuming the 90 days horizon Entravision Communications is expected to under-perform the KENNAMETAL INC. In addition to that, Entravision Communications is 2.23 times more volatile than KENNAMETAL INC. It trades about -0.01 of its total potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.02 per unit of volatility. If you would invest 2,547 in KENNAMETAL INC on August 31, 2024 and sell it today you would earn a total of 133.00 from holding KENNAMETAL INC or generate 5.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.74% |
| Values | Daily Returns |
Entravision Communications vs. KENNAMETAL INC
Performance |
| Timeline |
| Entravision Communications |
| KENNAMETAL INC |
Entravision Communications and KENNAMETAL INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entravision Communications and KENNAMETAL INC
The main advantage of trading using opposite Entravision Communications and KENNAMETAL INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications 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 Entravision Communications 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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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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