Correlation Between KVH Industries and NLIGHT

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Can any of the company-specific risk be diversified away by investing in both KVH Industries and NLIGHT 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 NLIGHT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KVH Industries and nLIGHT Inc, you can compare the effects of market volatilities on KVH Industries and NLIGHT 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 NLIGHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of KVH Industries and NLIGHT.

Diversification Opportunities for KVH Industries and NLIGHT

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between KVH and NLIGHT is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and nLIGHT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on nLIGHT Inc 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 NLIGHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of nLIGHT Inc has no effect on the direction of KVH Industries i.e., KVH Industries and NLIGHT go up and down completely randomly.

Pair Corralation between KVH Industries and NLIGHT

Given the investment horizon of 90 days KVH Industries is expected to generate 0.47 times more return on investment than NLIGHT. However, KVH Industries is 2.15 times less risky than NLIGHT. It trades about 0.13 of its potential returns per unit of risk. nLIGHT Inc is currently generating about 0.03 per unit of risk. If you would invest  449.00  in KVH Industries on November 3, 2024 and sell it today you would earn a total of  162.00  from holding KVH Industries or generate 36.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

KVH Industries  vs.  nLIGHT Inc

 Performance 
       Timeline  
KVH Industries 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 19 (%) 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.
nLIGHT Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days nLIGHT Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, NLIGHT is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

KVH Industries and NLIGHT Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KVH Industries and NLIGHT

The main advantage of trading using opposite KVH Industries and NLIGHT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KVH Industries position performs unexpectedly, NLIGHT 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 NLIGHT will offset losses from the drop in NLIGHT's long position.
The idea behind KVH Industries and nLIGHT Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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