Correlation Between KVH Industries and InterDigital

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

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

Diversification Opportunities for KVH Industries and InterDigital

-0.48

Correlation Coefficient

KVH Industries  InterDigital

Very good diversification

The 3 months correlation between KVH and InterDigital is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and InterDigital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterDigital 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 InterDigital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterDigital has no effect on the direction of KVH Industries i.e., KVH Industries and InterDigital go up and down completely randomly.

Pair Corralation between KVH Industries and InterDigital

Given the investment horizon of 90 days KVH Industries is expected to generate 70.59 times less return on investment than InterDigital. But when comparing it to its historical volatility, KVH Industries is 1.13 times less risky than InterDigital. It trades about 0.0 of its potential returns per unit of risk. InterDigital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  19,528  in InterDigital on December 30, 2024 and sell it today you would earn a total of  1,476  from holding InterDigital or generate 7.56% return on investment over 90 days.

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

KVH Industries  vs.  InterDigital

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.

InterDigital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InterDigital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, InterDigital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KVH Industries and InterDigital

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

The idea behind KVH Industries and InterDigital 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.