Correlation Between Makita and Kennametal

Can any of the company-specific risk be diversified away by investing in both Makita and Kennametal 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 Makita and Kennametal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Makita and Kennametal, you can compare the effects of market volatilities on Makita and Kennametal 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 Makita with a short position of Kennametal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Makita and Kennametal.

Diversification Opportunities for Makita and Kennametal

-0.46

Correlation Coefficient

Makita  Kennametal

Very good diversification

The 3 months correlation between Makita and Kennametal is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Makita and Kennametal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kennametal and Makita 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 Makita are associated (or correlated) with Kennametal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kennametal has no effect on the direction of Makita i.e., Makita and Kennametal go up and down completely randomly.

Pair Corralation between Makita and Kennametal

If you would invest  2,729  in Makita on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Makita or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Makita  vs.  Kennametal

Makita

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makita has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Makita is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kennametal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kennametal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Kennametal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Makita and Kennametal

The main advantage of trading using opposite Makita and Kennametal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Makita position performs unexpectedly, Kennametal 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 Kennametal will offset losses from the drop in Kennametal's long position.

The idea behind Makita and Kennametal pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.