Correlation Between Austal and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Austal and Kratos Defense 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 Austal and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Austal Limited and Kratos Defense Security, you can compare the effects of market volatilities on Austal and Kratos Defense 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 Austal with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Austal and Kratos Defense.
Diversification Opportunities for Austal and Kratos Defense
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Austal and Kratos is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Austal Limited and Kratos Defense Security in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kratos Defense Security and Austal 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 Austal Limited are associated (or correlated) with Kratos Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kratos Defense Security has no effect on the direction of Austal i.e., Austal and Kratos Defense go up and down completely randomly.
Pair Corralation between Austal and Kratos Defense
Assuming the 90 days horizon Austal Limited is expected to generate 1.76 times more return on investment than Kratos Defense. However, Austal is 1.76 times more volatile than Kratos Defense Security. It trades about 0.07 of its potential returns per unit of risk. Kratos Defense Security is currently generating about 0.08 per unit of risk. If you would invest 120.00 in Austal Limited on September 1, 2024 and sell it today you would earn a total of 86.00 from holding Austal Limited or generate 71.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Austal Limited vs. Kratos Defense Security
Performance |
| Timeline |
| Austal Limited |
| Kratos Defense Security |
Austal and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Austal and Kratos Defense
The main advantage of trading using opposite Austal and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Austal position performs unexpectedly, Kratos Defense 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 Kratos Defense will offset losses from the drop in Kratos Defense's long position.| Austal vs. Firan Technology Group | Austal vs. 808 Renewable Energy | Austal vs. Park Electrochemical | Austal vs. Innovative Solutions and |
| Kratos Defense vs. Northrop Grumman | Kratos Defense vs. General Dynamics | Kratos Defense vs. Raytheon Technologies Corp | Kratos Defense vs. Huntington Ingalls Industries |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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