Correlation Between KVH Industries and TESSCO Technologies

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

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

Diversification Opportunities for KVH Industries and TESSCO Technologies

0.46

Correlation Coefficient

KVH Industries  TESSCO Technologies

Very weak diversification

The 3 months correlation between KVH and TESSCO is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and TESSCO Technologies Incorporat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TESSCO Technologies 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 TESSCO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TESSCO Technologies has no effect on the direction of KVH Industries i.e., KVH Industries and TESSCO Technologies go up and down completely randomly.

Pair Corralation between KVH Industries and TESSCO Technologies

Given the investment horizon of 90 days KVH Industries is expected to under-perform the TESSCO Technologies. But the stock apears to be less risky and, when comparing its historical volatility, KVH Industries is 2.67 times less risky than TESSCO Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The TESSCO Technologies Incorporated is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  495.00  in TESSCO Technologies Incorporated on September 4, 2024 and sell it today you would earn a total of  404.00  from holding TESSCO Technologies Incorporated or generate 81.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	29.7%
Values	Daily Returns

KVH Industries  vs.  TESSCO Technologies Incorporat

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 uncertain technical indicators, KVH Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

TESSCO Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TESSCO Technologies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TESSCO Technologies is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KVH Industries and TESSCO Technologies

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

The idea behind KVH Industries and TESSCO Technologies Incorporated 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.