Correlation Between KENNAMETAL INC and INSURANCE AUST
Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and INSURANCE AUST 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 INSURANCE AUST into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KENNAMETAL INC and INSURANCE AUST GRP, you can compare the effects of market volatilities on KENNAMETAL INC and INSURANCE AUST 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 INSURANCE AUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and INSURANCE AUST.
Diversification Opportunities for KENNAMETAL INC and INSURANCE AUST
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KENNAMETAL and INSURANCE is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and INSURANCE AUST GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INSURANCE AUST GRP 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 INSURANCE AUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INSURANCE AUST GRP has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and INSURANCE AUST go up and down completely randomly.
Pair Corralation between KENNAMETAL INC and INSURANCE AUST
Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 1.68 times less return on investment than INSURANCE AUST. In addition to that, KENNAMETAL INC is 1.32 times more volatile than INSURANCE AUST GRP. It trades about 0.06 of its total potential returns per unit of risk. INSURANCE AUST GRP is currently generating about 0.13 per unit of volatility. If you would invest 331.00 in INSURANCE AUST GRP on September 4, 2024 and sell it today you would earn a total of 184.00 from holding INSURANCE AUST GRP or generate 55.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KENNAMETAL INC vs. INSURANCE AUST GRP
Performance |
| Timeline |
| KENNAMETAL INC |
| INSURANCE AUST GRP |
KENNAMETAL INC and INSURANCE AUST Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KENNAMETAL INC and INSURANCE AUST
The main advantage of trading using opposite KENNAMETAL INC and INSURANCE AUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, INSURANCE AUST 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 INSURANCE AUST will offset losses from the drop in INSURANCE AUST's long position.| KENNAMETAL INC vs. TOTAL GABON | KENNAMETAL INC vs. Walgreens Boots Alliance | KENNAMETAL INC vs. Peak Resources Limited |
| INSURANCE AUST vs. Strategic Investments AS | INSURANCE AUST vs. American Eagle Outfitters | INSURANCE AUST vs. Virtus Investment Partners | INSURANCE AUST vs. Aegean Airlines SA |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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