Correlation Between Viavi Solutions and KVH Industries

Can any of the company-specific risk be diversified away by investing in both Viavi 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 Viavi 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 Viavi Solutions and KVH Industries, you can compare the effects of market volatilities on Viavi 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 Viavi Solutions with a short position of KVH Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Viavi Solutions and KVH Industries.

Diversification Opportunities for Viavi Solutions and KVH Industries

0.24

Correlation Coefficient

Viavi Solutions  KVH Industries

Modest diversification

The 3 months correlation between Viavi and KVH is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Viavi Solutions and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Viavi 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 Viavi 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 Viavi Solutions i.e., Viavi Solutions and KVH Industries go up and down completely randomly.

Pair Corralation between Viavi Solutions and KVH Industries

Given the investment horizon of 90 days Viavi Solutions is expected to generate 1.26 times more return on investment than KVH Industries. However, Viavi Solutions is 1.26 times more volatile than KVH Industries. It trades about 0.08 of its potential returns per unit of risk. KVH Industries is currently generating about -0.02 per unit of risk. If you would invest  1,018  in Viavi Solutions on December 27, 2024 and sell it today you would earn a total of  141.00  from holding Viavi Solutions or generate 13.85% return on investment over 90 days.

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

Viavi Solutions  vs.  KVH Industries

Viavi Solutions

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viavi Solutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Viavi Solutions showed solid returns over the last few months and may actually be approaching a breakup point.

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 Viavi Solutions and KVH Industries

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

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..