Correlation Between KVH Industries and Sonos

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

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

Diversification Opportunities for KVH Industries and Sonos

0.67

Correlation Coefficient

KVH Industries  Sonos

Poor diversification

The 3 months correlation between KVH and Sonos is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos Inc 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 Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of KVH Industries i.e., KVH Industries and Sonos go up and down completely randomly.

Pair Corralation between KVH Industries and Sonos

Given the investment horizon of 90 days KVH Industries is expected to generate 0.9 times more return on investment than Sonos. However, KVH Industries is 1.11 times less risky than Sonos. It trades about 0.24 of its potential returns per unit of risk. Sonos Inc is currently generating about 0.11 per unit of risk. If you would invest  459.00  in KVH Industries on October 7, 2024 and sell it today you would earn a total of  106.00  from holding KVH Industries or generate 23.09% 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.  Sonos Inc

KVH Industries

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 10 (%) 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.

Sonos Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KVH Industries and Sonos

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

The idea behind KVH Industries and Sonos Inc 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.