Correlation Between Raytheon Technologies and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Raytheon Technologies 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 Raytheon Technologies and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Raytheon Technologies Corp and Kratos Defense Security, you can compare the effects of market volatilities on Raytheon Technologies 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 Raytheon Technologies with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Raytheon Technologies and Kratos Defense.
Diversification Opportunities for Raytheon Technologies and Kratos Defense
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Raytheon and Kratos is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Raytheon Technologies Corp 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 Raytheon Technologies 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 Raytheon Technologies Corp 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 Raytheon Technologies i.e., Raytheon Technologies and Kratos Defense go up and down completely randomly.
Pair Corralation between Raytheon Technologies and Kratos Defense
Considering the 90-day investment horizon Raytheon Technologies Corp is expected to under-perform the Kratos Defense. But the stock apears to be less risky and, when comparing its historical volatility, Raytheon Technologies Corp is 2.39 times less risky than Kratos Defense. The stock trades about -0.15 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 2,420 in Kratos Defense Security on August 28, 2024 and sell it today you would earn a total of 221.00 from holding Kratos Defense Security or generate 9.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Raytheon Technologies Corp vs. Kratos Defense Security
Performance |
| Timeline |
| Raytheon Technologies |
| Kratos Defense Security |
Raytheon Technologies and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Raytheon Technologies and Kratos Defense
The main advantage of trading using opposite Raytheon Technologies and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Raytheon Technologies 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.| Raytheon Technologies vs. Northrop Grumman | Raytheon Technologies vs. General Dynamics | Raytheon Technologies vs. The Boeing | Raytheon Technologies vs. L3Harris Technologies |
| 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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