Correlation Between Rolls Royce and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Rolls Royce 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 Rolls Royce and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rolls Royce Holdings PLC and Kratos Defense Security, you can compare the effects of market volatilities on Rolls Royce 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 Rolls Royce with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rolls Royce and Kratos Defense.
Diversification Opportunities for Rolls Royce and Kratos Defense
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rolls and Kratos is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rolls Royce Holdings PLC 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 Rolls Royce 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 Rolls Royce Holdings PLC 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 Rolls Royce i.e., Rolls Royce and Kratos Defense go up and down completely randomly.
Pair Corralation between Rolls Royce and Kratos Defense
Assuming the 90 days horizon Rolls Royce Holdings PLC is expected to generate 0.84 times more return on investment than Kratos Defense. However, Rolls Royce Holdings PLC is 1.19 times less risky than Kratos Defense. It trades about 0.15 of its potential returns per unit of risk. Kratos Defense Security is currently generating about 0.06 per unit of risk. If you would invest 184.00 in Rolls Royce Holdings PLC on November 27, 2024 and sell it today you would earn a total of 583.00 from holding Rolls Royce Holdings PLC or generate 316.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rolls Royce Holdings PLC vs. Kratos Defense Security
Performance |
| Timeline |
| Rolls Royce Holdings |
| Kratos Defense Security |
Rolls Royce and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rolls Royce and Kratos Defense
The main advantage of trading using opposite Rolls Royce and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rolls Royce 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.| Rolls Royce vs. Rolls Royce Holdings plc | Rolls Royce vs. VirTra Inc | Rolls Royce vs. BWX Technologies | Rolls Royce vs. Embraer SA ADR |
| 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |