Correlation Between National Storage and KENNAMETAL INC

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

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

Diversification Opportunities for National Storage and KENNAMETAL INC

-0.07

Correlation Coefficient

National Storage  KENNAMETAL INC

Good diversification

The 3 months correlation between National and KENNAMETAL is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding National Storage Affiliates and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC and National Storage 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 National Storage Affiliates are associated (or correlated) with KENNAMETAL INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENNAMETAL INC has no effect on the direction of National Storage i.e., National Storage and KENNAMETAL INC go up and down completely randomly.

Pair Corralation between National Storage and KENNAMETAL INC

Assuming the 90 days horizon National Storage Affiliates is expected to generate 0.88 times more return on investment than KENNAMETAL INC. However, National Storage Affiliates is 1.14 times less risky than KENNAMETAL INC. It trades about 0.08 of its potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.04 per unit of risk. If you would invest  2,860  in National Storage Affiliates on September 14, 2024 and sell it today you would earn a total of  1,176  from holding National Storage Affiliates or generate 41.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

National Storage Affiliates  vs.  KENNAMETAL INC

National Storage Aff

Risk-Adjusted Performance

0 of 100

Very Weak

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

KENNAMETAL INC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KENNAMETAL INC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, KENNAMETAL INC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Storage and KENNAMETAL INC

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

The idea behind National Storage Affiliates and KENNAMETAL INC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.