Correlation Between Aldel Financial and KVH Industries

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

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

Diversification Opportunities for Aldel Financial and KVH Industries

-0.36

Correlation Coefficient

Aldel Financial  KVH Industries

Very good diversification

The 3 months correlation between Aldel and KVH is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Aldel Financial 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 Aldel Financial II are associated (or correlated) with KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of Aldel Financial i.e., Aldel Financial and KVH Industries go up and down completely randomly.

Pair Corralation between Aldel Financial and KVH Industries

Assuming the 90 days horizon Aldel Financial II is expected to generate 0.09 times more return on investment than KVH Industries. However, Aldel Financial II is 10.58 times less risky than KVH Industries. It trades about 0.13 of its potential returns per unit of risk. KVH Industries is currently generating about -0.02 per unit of risk. If you would invest  1,006  in Aldel Financial II on December 27, 2024 and sell it today you would earn a total of  19.00  from holding Aldel Financial II or generate 1.89% return on investment over 90 days.

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

Aldel Financial II  vs.  KVH Industries

Aldel Financial II

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

KVH Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days KVH Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, KVH Industries is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aldel Financial and KVH Industries

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

The idea behind Aldel Financial II and KVH Industries 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.