Correlation Between KENNAMETAL INC and Motorcar Parts
Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and Motorcar Parts 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 Motorcar Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KENNAMETAL INC and Motorcar Parts of, you can compare the effects of market volatilities on KENNAMETAL INC and Motorcar Parts 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 Motorcar Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and Motorcar Parts.
Diversification Opportunities for KENNAMETAL INC and Motorcar Parts
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KENNAMETAL and Motorcar is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and Motorcar Parts of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motorcar Parts 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 Motorcar Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motorcar Parts has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and Motorcar Parts go up and down completely randomly.
Pair Corralation between KENNAMETAL INC and Motorcar Parts
Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.31 times less return on investment than Motorcar Parts. In addition to that, KENNAMETAL INC is 1.08 times more volatile than Motorcar Parts of. It trades about 0.23 of its total potential returns per unit of risk. Motorcar Parts of is currently generating about 0.32 per unit of volatility. If you would invest 510.00 in Motorcar Parts of on August 29, 2024 and sell it today you would earn a total of 155.00 from holding Motorcar Parts of or generate 30.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KENNAMETAL INC vs. Motorcar Parts of
Performance |
| Timeline |
| KENNAMETAL INC |
| Motorcar Parts |
KENNAMETAL INC and Motorcar Parts Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KENNAMETAL INC and Motorcar Parts
The main advantage of trading using opposite KENNAMETAL INC and Motorcar Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, Motorcar Parts 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 Motorcar Parts will offset losses from the drop in Motorcar Parts' long position.| KENNAMETAL INC vs. China Datang | KENNAMETAL INC vs. QUEEN S ROAD | KENNAMETAL INC vs. GOLD ROAD RES | KENNAMETAL INC vs. TERADATA |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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