Correlation Between KVH Industries and Biglari Holdings

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

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

Diversification Opportunities for KVH Industries and Biglari Holdings

0.66

Correlation Coefficient

KVH Industries  Biglari Holdings

Poor diversification

The 3 months correlation between KVH and Biglari is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings and KVH Industries 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 KVH Industries are associated (or correlated) with Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of KVH Industries i.e., KVH Industries and Biglari Holdings go up and down completely randomly.

Pair Corralation between KVH Industries and Biglari Holdings

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Biglari Holdings. In addition to that, KVH Industries is 1.25 times more volatile than Biglari Holdings. It trades about -0.02 of its total potential returns per unit of risk. Biglari Holdings is currently generating about 0.04 per unit of volatility. If you would invest  16,607  in Biglari Holdings on October 25, 2024 and sell it today you would earn a total of  5,598  from holding Biglari Holdings or generate 33.71% return on investment over 90 days.

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

KVH Industries  vs.  Biglari Holdings

KVH Industries

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Biglari Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biglari Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, Biglari Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KVH Industries and Biglari Holdings

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

The idea behind KVH Industries and Biglari Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.