Correlation Between Capital Clean and KVH Industries

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

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

Diversification Opportunities for Capital Clean and KVH Industries

0.31

Correlation Coefficient

Capital Clean  KVH Industries

Weak diversification

The 3 months correlation between Capital and KVH is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Capital Clean Energy and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Capital Clean 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 Capital Clean Energy 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 Capital Clean i.e., Capital Clean and KVH Industries go up and down completely randomly.

Pair Corralation between Capital Clean and KVH Industries

Given the investment horizon of 90 days Capital Clean Energy is expected to generate 1.34 times more return on investment than KVH Industries. However, Capital Clean is 1.34 times more volatile than KVH Industries. It trades about -0.07 of its potential returns per unit of risk. KVH Industries is currently generating about -0.16 per unit of risk. If you would invest  1,904  in Capital Clean Energy on December 2, 2024 and sell it today you would lose (55.00) from holding Capital Clean Energy or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Capital Clean Energy  vs.  KVH Industries

Capital Clean Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Clean Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capital Clean is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

KVH Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Capital Clean and KVH Industries

The main advantage of trading using opposite Capital Clean and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Clean 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 Capital Clean Energy 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.