Correlation Between Network 1 and KVH Industries

Can any of the company-specific risk be diversified away by investing in both Network 1 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 Network 1 and KVH Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Network 1 Technologies and KVH Industries, you can compare the effects of market volatilities on Network 1 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 Network 1 with a short position of KVH Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Network 1 and KVH Industries.

Diversification Opportunities for Network 1 and KVH Industries

0.27

Correlation Coefficient

Network 1  KVH Industries

Modest diversification

The 3 months correlation between Network and KVH is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Network 1 Technologies and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Network 1 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 Network 1 Technologies 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 Network 1 i.e., Network 1 and KVH Industries go up and down completely randomly.

Pair Corralation between Network 1 and KVH Industries

Given the investment horizon of 90 days Network 1 Technologies is expected to generate 0.89 times more return on investment than KVH Industries. However, Network 1 Technologies is 1.12 times less risky than KVH Industries. It trades about -0.02 of its potential returns per unit of risk. KVH Industries is currently generating about -0.03 per unit of risk. If you would invest  202.00  in Network 1 Technologies on October 6, 2024 and sell it today you would lose (58.00) from holding Network 1 Technologies or give up 28.71% of portfolio value over 90 days.

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

Network 1 Technologies  vs.  KVH Industries

Network 1 Technologies

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Network 1 Technologies are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Network 1 is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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 Network 1 and KVH Industries

The main advantage of trading using opposite Network 1 and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Network 1 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 Network 1 Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.