Correlation Between Visa and Kratos Defense
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Kratos Defense Security, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Kratos Defense.
Diversification Opportunities for Visa and Kratos Defense
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Visa and Kratos is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Kratos Defense go up and down completely randomly.
Pair Corralation between Visa and Kratos Defense
Taking into account the 90-day investment horizon Visa is expected to generate 2.33 times less return on investment than Kratos Defense. But when comparing it to its historical volatility, Visa Class A is 2.64 times less risky than Kratos Defense. It trades about 0.09 of its potential returns per unit of risk. Kratos Defense Security is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,361 in Kratos Defense Security on August 27, 2024 and sell it today you would earn a total of 1,302 from holding Kratos Defense Security or generate 95.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Visa Class A vs. Kratos Defense Security
Performance |
| Timeline |
| Visa Class A |
| Kratos Defense Security |
Visa and Kratos Defense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Kratos Defense
The main advantage of trading using opposite Visa and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. Morningstar Unconstrained Allocation | Visa vs. Sitka Gold Corp | Visa vs. MSCI ACWI exAUCONSUMER |
| 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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