Correlation Between Lockheed Martin and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Lockheed Martin 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 Lockheed Martin and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lockheed Martin and Kratos Defense Security, you can compare the effects of market volatilities on Lockheed Martin 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 Lockheed Martin with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lockheed Martin and Kratos Defense.
Diversification Opportunities for Lockheed Martin and Kratos Defense
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lockheed and Kratos is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin 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 Lockheed Martin i.e., Lockheed Martin and Kratos Defense go up and down completely randomly.
Pair Corralation between Lockheed Martin and Kratos Defense
Considering the 90-day investment horizon Lockheed Martin is expected to under-perform the Kratos Defense. But the stock apears to be less risky and, when comparing its historical volatility, Lockheed Martin is 2.97 times less risky than Kratos Defense. The stock trades about -0.19 of its potential returns per unit of risk. The Kratos Defense Security is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,401 in Kratos Defense Security on August 24, 2024 and sell it today you would earn a total of 223.00 from holding Kratos Defense Security or generate 9.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lockheed Martin vs. Kratos Defense Security
Performance |
| Timeline |
| Lockheed Martin |
| Kratos Defense Security |
Lockheed Martin and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lockheed Martin and Kratos Defense
The main advantage of trading using opposite Lockheed Martin and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lockheed Martin 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.| Lockheed Martin vs. Northrop Grumman | Lockheed Martin vs. General Dynamics | Lockheed Martin vs. L3Harris Technologies | Lockheed Martin vs. The Boeing |
| Kratos Defense vs. Planet Labs PBC | Kratos Defense vs. Rocket Lab USA | Kratos Defense vs. Redwire Corp | Kratos Defense vs. Virgin Galactic Holdings |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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