Correlation Between KENNAMETAL INC and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both KENNAMETAL INC and Sterling Construction 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 Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KENNAMETAL INC and Sterling Construction, you can compare the effects of market volatilities on KENNAMETAL INC and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of KENNAMETAL INC and Sterling Construction.
Diversification Opportunities for KENNAMETAL INC and Sterling Construction
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between KENNAMETAL and Sterling is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding KENNAMETAL INC and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of KENNAMETAL INC i.e., KENNAMETAL INC and Sterling Construction go up and down completely randomly.
Pair Corralation between KENNAMETAL INC and Sterling Construction
Assuming the 90 days trading horizon KENNAMETAL INC is expected to generate 0.32 times more return on investment than Sterling Construction. However, KENNAMETAL INC is 3.09 times less risky than Sterling Construction. It trades about -0.35 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.12 per unit of risk. If you would invest 2,540 in KENNAMETAL INC on October 13, 2024 and sell it today you would lose (180.00) from holding KENNAMETAL INC or give up 7.09% 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. Sterling Construction
Performance |
| Timeline |
| KENNAMETAL INC |
| Sterling Construction |
KENNAMETAL INC and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KENNAMETAL INC and Sterling Construction
The main advantage of trading using opposite KENNAMETAL INC and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KENNAMETAL INC position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| KENNAMETAL INC vs. WILLIS LEASE FIN | KENNAMETAL INC vs. AOI Electronics Co | KENNAMETAL INC vs. Methode Electronics | KENNAMETAL INC vs. STORE ELECTRONIC |
| Sterling Construction vs. CanSino Biologics | Sterling Construction vs. Commercial Vehicle Group | Sterling Construction vs. Geely Automobile Holdings | Sterling Construction vs. Grupo Carso SAB |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |