Correlation Between Kratos Defense and Austal
Can any of the company-specific risk be diversified away by investing in both Kratos Defense and Austal 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 Kratos Defense and Austal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kratos Defense Security and Austal Limited, you can compare the effects of market volatilities on Kratos Defense and Austal 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 Kratos Defense with a short position of Austal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kratos Defense and Austal.
Diversification Opportunities for Kratos Defense and Austal
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Kratos and Austal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Austal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Austal Limited and Kratos Defense 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 Kratos Defense Security are associated (or correlated) with Austal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Austal Limited has no effect on the direction of Kratos Defense i.e., Kratos Defense and Austal go up and down completely randomly.
Pair Corralation between Kratos Defense and Austal
Given the investment horizon of 90 days Kratos Defense is expected to generate 1.53 times less return on investment than Austal. But when comparing it to its historical volatility, Kratos Defense Security is 1.76 times less risky than Austal. It trades about 0.08 of its potential returns per unit of risk. Austal Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. 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 |
Kratos Defense Security vs. Austal Limited
Performance |
| Timeline |
| Kratos Defense Security |
| Austal Limited |
Kratos Defense and Austal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kratos Defense and Austal
The main advantage of trading using opposite Kratos Defense and Austal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kratos Defense position performs unexpectedly, Austal 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 Austal will offset losses from the drop in Austal's long position.| Kratos Defense vs. Northrop Grumman | Kratos Defense vs. General Dynamics | Kratos Defense vs. Raytheon Technologies Corp | Kratos Defense vs. Huntington Ingalls Industries |
| Austal vs. Firan Technology Group | Austal vs. 808 Renewable Energy | Austal vs. Park Electrochemical | Austal vs. Innovative Solutions and |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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