Correlation Between KVH Industries and NETGEAR

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

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

Diversification Opportunities for KVH Industries and NETGEAR

0.81

Correlation Coefficient

KVH Industries  NETGEAR

Very poor diversification

The 3 months correlation between KVH and NETGEAR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding KVH Industries and NETGEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NETGEAR 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 NETGEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NETGEAR has no effect on the direction of KVH Industries i.e., KVH Industries and NETGEAR go up and down completely randomly.

Pair Corralation between KVH Industries and NETGEAR

Given the investment horizon of 90 days KVH Industries is expected to generate 428.67 times less return on investment than NETGEAR. But when comparing it to its historical volatility, KVH Industries is 2.4 times less risky than NETGEAR. It trades about 0.0 of its potential returns per unit of risk. NETGEAR is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  1,997  in NETGEAR on February 3, 2025 and sell it today you would earn a total of  785.00  from holding NETGEAR or generate 39.31% return on investment over 90 days.

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

KVH Industries  vs.  NETGEAR

KVH Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days KVH Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in June 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

NETGEAR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, NETGEAR may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with KVH Industries and NETGEAR

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

The idea behind KVH Industries and NETGEAR 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.