Correlation Between KVH Industries and Lantronix

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

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

Diversification Opportunities for KVH Industries and Lantronix

-0.52

Correlation Coefficient

KVH Industries  Lantronix

Excellent diversification

The 3 months correlation between KVH and Lantronix is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Lantronix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lantronix 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 Lantronix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lantronix has no effect on the direction of KVH Industries i.e., KVH Industries and Lantronix go up and down completely randomly.

Pair Corralation between KVH Industries and Lantronix

Given the investment horizon of 90 days KVH Industries is expected to generate 0.43 times more return on investment than Lantronix. However, KVH Industries is 2.33 times less risky than Lantronix. It trades about 0.15 of its potential returns per unit of risk. Lantronix is currently generating about -0.02 per unit of risk. If you would invest  449.00  in KVH Industries on September 3, 2024 and sell it today you would earn a total of  102.00  from holding KVH Industries or generate 22.72% 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.  Lantronix

KVH Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 12 (%) 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.

Lantronix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lantronix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lantronix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KVH Industries and Lantronix

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

The idea behind KVH Industries and Lantronix 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.