Correlation Between Willamette Valley and KVH Industries

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

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

Diversification Opportunities for Willamette Valley and KVH Industries

0.25

Correlation Coefficient

Willamette Valley  KVH Industries

Modest diversification

The 3 months correlation between Willamette and KVH is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Willamette Valley Vineyards and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Willamette Valley 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 Willamette Valley Vineyards 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 Willamette Valley i.e., Willamette Valley and KVH Industries go up and down completely randomly.

Pair Corralation between Willamette Valley and KVH Industries

Assuming the 90 days horizon Willamette Valley is expected to generate 3.68 times less return on investment than KVH Industries. In addition to that, Willamette Valley is 1.19 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 0.22 per unit of volatility. If you would invest  476.00  in KVH Industries on October 27, 2024 and sell it today you would earn a total of  136.00  from holding KVH Industries or generate 28.57% return on investment over 90 days.

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

Willamette Valley Vineyards  vs.  KVH Industries

Willamette Valley

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Willamette Valley Vineyards are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Willamette Valley may actually be approaching a critical reversion point that can send shares even higher in February 2025.

KVH Industries

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willamette Valley and KVH Industries

The main advantage of trading using opposite Willamette Valley and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Willamette Valley 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 Willamette Valley Vineyards 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.