Correlation Between Motorola Solutions and KVH Industries

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

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

Diversification Opportunities for Motorola Solutions and KVH Industries

0.31

Correlation Coefficient

Motorola Solutions  KVH Industries

Weak diversification

The 3 months correlation between Motorola and KVH is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Motorola Solutions 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 Motorola Solutions are associated (or correlated) with KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and KVH Industries go up and down completely randomly.

Pair Corralation between Motorola Solutions and KVH Industries

Considering the 90-day investment horizon Motorola Solutions is expected to under-perform the KVH Industries. But the stock apears to be less risky and, when comparing its historical volatility, Motorola Solutions is 2.6 times less risky than KVH Industries. The stock trades about -0.4 of its potential returns per unit of risk. The KVH Industries is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  584.00  in KVH Industries on October 6, 2024 and sell it today you would lose (19.00) from holding KVH Industries or give up 3.25% of portfolio value over 90 days.

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

Motorola Solutions  vs.  KVH Industries

Motorola Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Motorola Solutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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 unfluctuating technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Motorola Solutions and KVH Industries

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

The idea behind Motorola Solutions and KVH Industries 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.