Correlation Between AudioCodes and KVH Industries

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

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

Diversification Opportunities for AudioCodes and KVH Industries

-0.45

Correlation Coefficient

AudioCodes  KVH Industries

Very good diversification

The 3 months correlation between AudioCodes and KVH is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding AudioCodes and KVH Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KVH Industries and AudioCodes 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 AudioCodes are associated (or correlated) with KVH Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KVH Industries has no effect on the direction of AudioCodes i.e., AudioCodes and KVH Industries go up and down completely randomly.

Pair Corralation between AudioCodes and KVH Industries

Given the investment horizon of 90 days AudioCodes is expected to under-perform the KVH Industries. In addition to that, AudioCodes is 1.11 times more volatile than KVH Industries. It trades about -0.04 of its total potential returns per unit of risk. KVH Industries is currently generating about -0.02 per unit of volatility. If you would invest  792.00  in KVH Industries on March 7, 2024 and sell it today you would lose (282.00) from holding KVH Industries or give up 35.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AudioCodes  vs.  KVH Industries

AudioCodes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AudioCodes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KVH Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KVH Industries are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical indicators, KVH Industries may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with AudioCodes and KVH Industries

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

The idea behind AudioCodes and KVH Industries 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..