Correlation Between Catalent and KVH Industries

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

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

Diversification Opportunities for Catalent and KVH Industries

0.38

Correlation Coefficient

Catalent  KVH Industries

Weak diversification

The 3 months correlation between Catalent and KVH is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Catalent and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and Catalent 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 Catalent 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 Catalent i.e., Catalent and KVH Industries go up and down completely randomly.

Pair Corralation between Catalent and KVH Industries

Given the investment horizon of 90 days Catalent is expected to generate 28.02 times less return on investment than KVH Industries. But when comparing it to its historical volatility, Catalent is 3.68 times less risky than KVH Industries. It trades about 0.02 of its potential returns per unit of risk. KVH Industries is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  449.00  in KVH Industries on September 3, 2024 and sell it today you would earn a total of  102.00  from holding KVH Industries or generate 22.72% return on investment over 90 days.

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

Catalent  vs.  KVH Industries

Catalent

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

KVH Industries

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalent and KVH Industries

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

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.