Correlation Between KVH Industries and Viavi Solutions

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

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

Diversification Opportunities for KVH Industries and Viavi Solutions

0.54

Correlation Coefficient

KVH Industries  Viavi Solutions

Very weak diversification

The 3 months correlation between KVH and Viavi is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Viavi Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viavi Solutions 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 Viavi Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viavi Solutions has no effect on the direction of KVH Industries i.e., KVH Industries and Viavi Solutions go up and down completely randomly.

Pair Corralation between KVH Industries and Viavi Solutions

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Viavi Solutions. But the stock apears to be less risky and, when comparing its historical volatility, KVH Industries is 3.21 times less risky than Viavi Solutions. The stock trades about -0.01 of its potential returns per unit of risk. The Viavi Solutions is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  989.00  in Viavi Solutions on November 29, 2024 and sell it today you would earn a total of  138.00  from holding Viavi Solutions or generate 13.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

KVH Industries  vs.  Viavi Solutions

KVH Industries

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KVH Industries and Viavi Solutions

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

The idea behind KVH Industries and Viavi Solutions 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.