Correlation Between Fair Isaac and KENNAMETAL INC
Can any of the company-specific risk be diversified away by investing in both Fair Isaac 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 Fair Isaac and KENNAMETAL INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fair Isaac Corp and KENNAMETAL INC, you can compare the effects of market volatilities on Fair Isaac 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 Fair Isaac with a short position of KENNAMETAL INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fair Isaac and KENNAMETAL INC.
Diversification Opportunities for Fair Isaac and KENNAMETAL INC
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Fair and KENNAMETAL is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Fair Isaac Corp and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC and Fair Isaac 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 Fair Isaac Corp 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 Fair Isaac i.e., Fair Isaac and KENNAMETAL INC go up and down completely randomly.
Pair Corralation between Fair Isaac and KENNAMETAL INC
Assuming the 90 days trading horizon Fair Isaac Corp is expected to generate 1.1 times more return on investment than KENNAMETAL INC. However, Fair Isaac is 1.1 times more volatile than KENNAMETAL INC. It trades about 0.15 of its potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.04 per unit of risk. If you would invest 103,000 in Fair Isaac Corp on September 14, 2024 and sell it today you would earn a total of 108,600 from holding Fair Isaac Corp or generate 105.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fair Isaac Corp vs. KENNAMETAL INC
Performance |
| Timeline |
| Fair Isaac Corp |
| KENNAMETAL INC |
Fair Isaac and KENNAMETAL INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fair Isaac and KENNAMETAL INC
The main advantage of trading using opposite Fair Isaac and KENNAMETAL INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fair Isaac 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 Fair Isaac Corp 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.| KENNAMETAL INC vs. ELMOS SEMICONDUCTOR | KENNAMETAL INC vs. National Storage Affiliates | KENNAMETAL INC vs. Tower Semiconductor | KENNAMETAL INC vs. Elmos Semiconductor SE |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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