Correlation Between KENNAMETAL INC and Guangzhou Baiyunshan
Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and Guangzhou Baiyunshan 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 Guangzhou Baiyunshan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KENNAMETAL INC and Guangzhou Baiyunshan Pharmaceutical, you can compare the effects of market volatilities on KENNAMETAL INC and Guangzhou Baiyunshan 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 Guangzhou Baiyunshan. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and Guangzhou Baiyunshan.
Diversification Opportunities for KENNAMETAL INC and Guangzhou Baiyunshan
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KENNAMETAL and Guangzhou is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and Guangzhou Baiyunshan Pharmaceu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangzhou Baiyunshan 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 Guangzhou Baiyunshan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangzhou Baiyunshan has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and Guangzhou Baiyunshan go up and down completely randomly.
Pair Corralation between KENNAMETAL INC and Guangzhou Baiyunshan
Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 2.26 times less return on investment than Guangzhou Baiyunshan. But when comparing it to its historical volatility, KENNAMETAL INC is 1.29 times less risky than Guangzhou Baiyunshan. It trades about 0.09 of its potential returns per unit of risk. Guangzhou Baiyunshan Pharmaceutical is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 153.00 in Guangzhou Baiyunshan Pharmaceutical on September 12, 2024 and sell it today you would earn a total of 59.00 from holding Guangzhou Baiyunshan Pharmaceutical or generate 38.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.46% |
| Values | Daily Returns |
KENNAMETAL INC vs. Guangzhou Baiyunshan Pharmaceu
Performance |
| Timeline |
| KENNAMETAL INC |
| Guangzhou Baiyunshan |
KENNAMETAL INC and Guangzhou Baiyunshan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KENNAMETAL INC and Guangzhou Baiyunshan
The main advantage of trading using opposite KENNAMETAL INC and Guangzhou Baiyunshan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, Guangzhou Baiyunshan 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 Guangzhou Baiyunshan will offset losses from the drop in Guangzhou Baiyunshan's long position.| KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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