Correlation Between KENNAMETAL INC and SBM OFFSHORE
Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and SBM OFFSHORE 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 SBM OFFSHORE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KENNAMETAL INC and SBM OFFSHORE, you can compare the effects of market volatilities on KENNAMETAL INC and SBM OFFSHORE 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 SBM OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and SBM OFFSHORE.
Diversification Opportunities for KENNAMETAL INC and SBM OFFSHORE
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KENNAMETAL and SBM is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and SBM OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBM OFFSHORE 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 SBM OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBM OFFSHORE has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and SBM OFFSHORE go up and down completely randomly.
Pair Corralation between KENNAMETAL INC and SBM OFFSHORE
Assuming the 90 days trading horizon KENNAMETAL INC is expected to under-perform the SBM OFFSHORE. But the stock apears to be less risky and, when comparing its historical volatility, KENNAMETAL INC is 1.25 times less risky than SBM OFFSHORE. The stock trades about -0.22 of its potential returns per unit of risk. The SBM OFFSHORE is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 1,766 in SBM OFFSHORE on September 13, 2024 and sell it today you would lose (63.00) from holding SBM OFFSHORE or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KENNAMETAL INC vs. SBM OFFSHORE
Performance |
| Timeline |
| KENNAMETAL INC |
| SBM OFFSHORE |
KENNAMETAL INC and SBM OFFSHORE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KENNAMETAL INC and SBM OFFSHORE
The main advantage of trading using opposite KENNAMETAL INC and SBM OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, SBM OFFSHORE 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 SBM OFFSHORE will offset losses from the drop in SBM OFFSHORE's long position.| KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc | KENNAMETAL INC vs. Apple Inc |
| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |