Correlation Between KVH Industries and Red Cat

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

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

Diversification Opportunities for KVH Industries and Red Cat

0.37

Correlation Coefficient

KVH Industries  Red Cat

Weak diversification

The 3 months correlation between KVH and Red is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Red Cat Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Cat 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 Red Cat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Cat Holdings has no effect on the direction of KVH Industries i.e., KVH Industries and Red Cat go up and down completely randomly.

Pair Corralation between KVH Industries and Red Cat

Given the investment horizon of 90 days KVH Industries is expected to generate 0.34 times more return on investment than Red Cat. However, KVH Industries is 2.94 times less risky than Red Cat. It trades about -0.01 of its potential returns per unit of risk. Red Cat Holdings is currently generating about -0.14 per unit of risk. If you would invest  536.00  in KVH Industries on December 26, 2024 and sell it today you would lose (20.00) from holding KVH Industries or give up 3.73% of portfolio value over 90 days.

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

KVH Industries  vs.  Red Cat Holdings

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.

Red Cat Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red Cat Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with KVH Industries and Red Cat

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

The idea behind KVH Industries and Red Cat 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.