Correlation Between Ceragon Networks and KVH Industries

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

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

Diversification Opportunities for Ceragon Networks and KVH Industries

0.93

Correlation Coefficient

Ceragon Networks  KVH Industries

Almost no diversification

The 3 months correlation between Ceragon and KVH is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ceragon Networks and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Ceragon Networks 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 Ceragon Networks 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 Ceragon Networks i.e., Ceragon Networks and KVH Industries go up and down completely randomly.

Pair Corralation between Ceragon Networks and KVH Industries

Given the investment horizon of 90 days Ceragon Networks is expected to generate 2.09 times more return on investment than KVH Industries. However, Ceragon Networks is 2.09 times more volatile than KVH Industries. It trades about 0.24 of its potential returns per unit of risk. KVH Industries is currently generating about 0.17 per unit of risk. If you would invest  271.00  in Ceragon Networks on September 13, 2024 and sell it today you would earn a total of  220.00  from holding Ceragon Networks or generate 81.18% return on investment over 90 days.

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

Ceragon Networks  vs.  KVH Industries

Ceragon Networks

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ceragon Networks are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Ceragon Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

KVH Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ceragon Networks and KVH Industries

The main advantage of trading using opposite Ceragon Networks and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ceragon Networks 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 Ceragon Networks 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.