Correlation Between KVH Industries and OSI Systems

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

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

Diversification Opportunities for KVH Industries and OSI Systems

0.25

Correlation Coefficient

KVH Industries  OSI Systems

Modest diversification

The 3 months correlation between KVH and OSI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and OSI Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSI Systems 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 OSI Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSI Systems has no effect on the direction of KVH Industries i.e., KVH Industries and OSI Systems go up and down completely randomly.

Pair Corralation between KVH Industries and OSI Systems

Given the investment horizon of 90 days KVH Industries is expected to generate 32.29 times less return on investment than OSI Systems. But when comparing it to its historical volatility, KVH Industries is 1.19 times less risky than OSI Systems. It trades about 0.0 of its potential returns per unit of risk. OSI Systems is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  17,717  in OSI Systems on December 26, 2024 and sell it today you would earn a total of  2,313  from holding OSI Systems or generate 13.06% return on investment over 90 days.

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

KVH Industries  vs.  OSI Systems

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.

OSI Systems

Risk-Adjusted Performance

OK

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

Pair Trading with KVH Industries and OSI Systems

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

The idea behind KVH Industries and OSI Systems 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.