Correlation Between KVH Industries and Brinker International

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

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

Diversification Opportunities for KVH Industries and Brinker International

0.63

Correlation Coefficient

KVH Industries  Brinker International

Poor diversification

The 3 months correlation between KVH and Brinker is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International 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 Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of KVH Industries i.e., KVH Industries and Brinker International go up and down completely randomly.

Pair Corralation between KVH Industries and Brinker International

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Brinker International. But the stock apears to be less risky and, when comparing its historical volatility, KVH Industries is 1.55 times less risky than Brinker International. The stock trades about -0.01 of its potential returns per unit of risk. The Brinker International is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  13,210  in Brinker International on December 28, 2024 and sell it today you would earn a total of  2,229  from holding Brinker International or generate 16.87% 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.  Brinker International

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.

Brinker International

Risk-Adjusted Performance

Modest

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

Pair Trading with KVH Industries and Brinker International

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

The idea behind KVH Industries and Brinker International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.