Correlation Between KVH Industries and Software Acquisition

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

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

Diversification Opportunities for KVH Industries and Software Acquisition

-0.57

Correlation Coefficient

KVH Industries  Software Acquisition

Excellent diversification

The 3 months correlation between KVH and Software is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Software Acquisition Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Acquisition and KVH Industries 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 KVH Industries are associated (or correlated) with Software Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Acquisition has no effect on the direction of KVH Industries i.e., KVH Industries and Software Acquisition go up and down completely randomly.

Pair Corralation between KVH Industries and Software Acquisition

Given the investment horizon of 90 days KVH Industries is expected to generate 0.76 times more return on investment than Software Acquisition. However, KVH Industries is 1.32 times less risky than Software Acquisition. It trades about 0.2 of its potential returns per unit of risk. Software Acquisition Group is currently generating about -0.08 per unit of risk. If you would invest  452.00  in KVH Industries on September 12, 2024 and sell it today you would earn a total of  134.00  from holding KVH Industries or generate 29.65% return on investment over 90 days.

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

KVH Industries  vs.  Software Acquisition Group

KVH Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Software Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Software Acquisition Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with KVH Industries and Software Acquisition

The main advantage of trading using opposite KVH Industries and Software Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KVH Industries position performs unexpectedly, Software Acquisition 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 Software Acquisition will offset losses from the drop in Software Acquisition's long position.

The idea behind KVH Industries and Software Acquisition Group 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.