Correlation Between ClearOne and KVH Industries

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

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

Diversification Opportunities for ClearOne and KVH Industries

-0.4

Correlation Coefficient

ClearOne  KVH Industries

Very good diversification

The 3 months correlation between ClearOne and KVH is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ClearOne and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and ClearOne 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 ClearOne 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 ClearOne i.e., ClearOne and KVH Industries go up and down completely randomly.

Pair Corralation between ClearOne and KVH Industries

Given the investment horizon of 90 days ClearOne is expected to generate 1.47 times less return on investment than KVH Industries. In addition to that, ClearOne is 2.15 times more volatile than KVH Industries. It trades about 0.13 of its total potential returns per unit of risk. KVH Industries is currently generating about 0.41 per unit of volatility. If you would invest  497.00  in KVH Industries on September 17, 2024 and sell it today you would earn a total of  85.00  from holding KVH Industries or generate 17.1% return on investment over 90 days.

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

ClearOne  vs.  KVH Industries

ClearOne

Risk-Adjusted Performance

0 of 100

Very Weak

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

KVH Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ClearOne and KVH Industries

The main advantage of trading using opposite ClearOne and KVH Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ClearOne 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 ClearOne 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.