Correlation Between KVH Industries and Waters

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

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

Diversification Opportunities for KVH Industries and Waters

0.4

Correlation Coefficient

KVH Industries  Waters

Very weak diversification

The 3 months correlation between KVH and Waters is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Waters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waters 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 Waters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waters has no effect on the direction of KVH Industries i.e., KVH Industries and Waters go up and down completely randomly.

Pair Corralation between KVH Industries and Waters

Given the investment horizon of 90 days KVH Industries is expected to generate 1.0 times less return on investment than Waters. But when comparing it to its historical volatility, KVH Industries is 1.17 times less risky than Waters. It trades about 0.11 of its potential returns per unit of risk. Waters is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  28,831  in Waters on October 8, 2024 and sell it today you would earn a total of  8,345  from holding Waters or generate 28.94% return on investment over 90 days.

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

KVH Industries  vs.  Waters

KVH Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 8 (%) 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.

Waters

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Waters is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KVH Industries and Waters

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

The idea behind KVH Industries and Waters 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.