Correlation Between Boeing and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Boeing 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 Boeing and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Boeing and Kratos Defense Security, you can compare the effects of market volatilities on Boeing 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 Boeing with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boeing and Kratos Defense.
Diversification Opportunities for Boeing and Kratos Defense
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Boeing and Kratos is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding The Boeing 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 Boeing 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 The Boeing 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 Boeing i.e., Boeing and Kratos Defense go up and down completely randomly.
Pair Corralation between Boeing and Kratos Defense
Allowing for the 90-day total investment horizon The Boeing is expected to under-perform the Kratos Defense. But the stock apears to be less risky and, when comparing its historical volatility, The Boeing is 1.33 times less risky than Kratos Defense. The stock trades about -0.03 of its potential returns per unit of risk. The Kratos Defense Security is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,180 in Kratos Defense Security on August 27, 2024 and sell it today you would earn a total of 1,483 from holding Kratos Defense Security or generate 125.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Boeing vs. Kratos Defense Security
Performance |
| Timeline |
| Boeing |
| Kratos Defense Security |
Boeing and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Boeing and Kratos Defense
The main advantage of trading using opposite Boeing and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boeing 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.The idea behind The Boeing and Kratos Defense Security 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.| 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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