Correlation Between KVH Industries and Telefonaktiebolaget

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

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

Diversification Opportunities for KVH Industries and Telefonaktiebolaget

0.15

Correlation Coefficient

KVH Industries  Telefonaktiebolaget

Average diversification

The 3 months correlation between KVH and Telefonaktiebolaget is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Telefonaktiebolaget LM Ericsso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefonaktiebolaget 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 Telefonaktiebolaget. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefonaktiebolaget has no effect on the direction of KVH Industries i.e., KVH Industries and Telefonaktiebolaget go up and down completely randomly.

Pair Corralation between KVH Industries and Telefonaktiebolaget

Given the investment horizon of 90 days KVH Industries is expected to under-perform the Telefonaktiebolaget. In addition to that, KVH Industries is 1.25 times more volatile than Telefonaktiebolaget LM Ericsson. It trades about -0.02 of its total potential returns per unit of risk. Telefonaktiebolaget LM Ericsson is currently generating about 0.0 per unit of volatility. If you would invest  678.00  in Telefonaktiebolaget LM Ericsson on March 8, 2024 and sell it today you would lose (46.00) from holding Telefonaktiebolaget LM Ericsson or give up 6.78% of portfolio value over 90 days.

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

KVH Industries  vs.  Telefonaktiebolaget LM Ericsso

KVH Industries

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical indicators, KVH Industries may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Telefonaktiebolaget

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Telefonaktiebolaget LM Ericsson are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Telefonaktiebolaget exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KVH Industries and Telefonaktiebolaget

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

The idea behind KVH Industries and Telefonaktiebolaget LM Ericsson 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.