Correlation Between KVH Industries and Iridium Communications
Can any of the company-specific risk be diversified away by investing in both KVH Industries and Iridium Communications 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 Iridium Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KVH Industries and Iridium Communications, you can compare the effects of market volatilities on KVH Industries and Iridium Communications 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 Iridium Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of KVH Industries and Iridium Communications.
Diversification Opportunities for KVH Industries and Iridium Communications
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between KVH and Iridium is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and Iridium Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iridium Communications 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 Iridium Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iridium Communications has no effect on the direction of KVH Industries i.e., KVH Industries and Iridium Communications go up and down completely randomly.
Pair Corralation between KVH Industries and Iridium Communications
Given the investment horizon of 90 days KVH Industries is expected to under-perform the Iridium Communications. In addition to that, KVH Industries is 1.14 times more volatile than Iridium Communications. It trades about -0.03 of its total potential returns per unit of risk. Iridium Communications is currently generating about -0.03 per unit of volatility. If you would invest 4,844 in Iridium Communications on August 27, 2024 and sell it today you would lose (1,904) from holding Iridium Communications or give up 39.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KVH Industries vs. Iridium Communications
Performance |
| Timeline |
| KVH Industries |
| Iridium Communications |
KVH Industries and Iridium Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KVH Industries and Iridium Communications
The main advantage of trading using opposite KVH Industries and Iridium Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KVH Industries position performs unexpectedly, Iridium Communications 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 Iridium Communications will offset losses from the drop in Iridium Communications' long position.| KVH Industries vs. Ichor Holdings | KVH Industries vs. Fabrinet | KVH Industries vs. Hello Group | KVH Industries vs. Ultra Clean Holdings |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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