Correlation Between Technical Communications and KVH Industries

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

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

Diversification Opportunities for Technical Communications and KVH Industries

0.0

Correlation Coefficient

Technical Communications  KVH Industries

Pay attention - limited upside

The 3 months correlation between Technical and KVH is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Technical Communications and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Technical Communications 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 Technical Communications 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 Technical Communications i.e., Technical Communications and KVH Industries go up and down completely randomly.

Pair Corralation between Technical Communications and KVH Industries

If you would invest  528.00  in KVH Industries on December 19, 2024 and sell it today you would lose (2.00) from holding KVH Industries or give up 0.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Technical Communications  vs.  KVH Industries

Technical Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technical Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Technical Communications is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 Technical Communications and KVH Industries

The main advantage of trading using opposite Technical Communications and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technical Communications 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 Technical Communications 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.