Correlation Between NETGEAR and KVH Industries

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

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

Diversification Opportunities for NETGEAR and KVH Industries

0.66

Correlation Coefficient

NETGEAR  KVH Industries

Poor diversification

The 3 months correlation between NETGEAR and KVH is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and KVH Industries go up and down completely randomly.

Pair Corralation between NETGEAR and KVH Industries

Given the investment horizon of 90 days NETGEAR is expected to under-perform the KVH Industries. In addition to that, NETGEAR is 1.07 times more volatile than KVH Industries. It trades about -0.05 of its total potential returns per unit of risk. KVH Industries is currently generating about -0.01 per unit of volatility. If you would invest  558.00  in KVH Industries on December 28, 2024 and sell it today you would lose (19.00) from holding KVH Industries or give up 3.41% of portfolio value over 90 days.

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

NETGEAR  vs.  KVH Industries

NETGEAR

Risk-Adjusted Performance

Very Weak

Over the last 90 days NETGEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

Pair Trading with NETGEAR and KVH Industries

The main advantage of trading using opposite NETGEAR and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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.

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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.