Correlation Between BorgWarner and KVH Industries

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

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

Diversification Opportunities for BorgWarner and KVH Industries

0.27

Correlation Coefficient

BorgWarner  KVH Industries

Modest diversification

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

Pair Corralation between BorgWarner and KVH Industries

Considering the 90-day investment horizon BorgWarner is expected to generate 13.58 times less return on investment than KVH Industries. But when comparing it to its historical volatility, BorgWarner is 1.16 times less risky than KVH Industries. It trades about 0.05 of its potential returns per unit of risk. KVH Industries is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest  457.00  in KVH Industries on September 5, 2024 and sell it today you would earn a total of  127.00  from holding KVH Industries or generate 27.79% return on investment over 90 days.

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

BorgWarner  vs.  KVH Industries

BorgWarner

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BorgWarner are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, BorgWarner is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KVH Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 13 (%) 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 BorgWarner and KVH Industries

The main advantage of trading using opposite BorgWarner and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BorgWarner 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 BorgWarner 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.