Correlation Between Target Hospitality and KVH Industries

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

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

Diversification Opportunities for Target Hospitality and KVH Industries

0.48

Correlation Coefficient

Target Hospitality  KVH Industries

Very weak diversification

The 3 months correlation between Target and KVH is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Target Hospitality Corp and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Target Hospitality 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 Target Hospitality Corp 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 Target Hospitality i.e., Target Hospitality and KVH Industries go up and down completely randomly.

Pair Corralation between Target Hospitality and KVH Industries

Allowing for the 90-day total investment horizon Target Hospitality is expected to generate 3.48 times less return on investment than KVH Industries. In addition to that, Target Hospitality is 1.47 times more volatile than KVH Industries. It trades about 0.01 of its total potential returns per unit of risk. KVH Industries is currently generating about 0.04 per unit of volatility. If you would invest  480.00  in KVH Industries on October 11, 2024 and sell it today you would earn a total of  89.00  from holding KVH Industries or generate 18.54% return on investment over 90 days.

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

Target Hospitality Corp  vs.  KVH Industries

Target Hospitality Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Target Hospitality Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly abnormal technical indicators, Target Hospitality demonstrated solid returns over the last few months and may actually be approaching a breakup point.

KVH Industries

Risk-Adjusted Performance

8 of 100

Modest

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.

Pair Trading with Target Hospitality and KVH Industries

The main advantage of trading using opposite Target Hospitality and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Hospitality 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 Target Hospitality Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.