Correlation Between Appian Corp and Kratos Defense

Can any of the company-specific risk be diversified away by investing in both Appian Corp 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 Appian Corp and Kratos Defense into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Appian Corp and Kratos Defense Security, you can compare the effects of market volatilities on Appian Corp 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 Appian Corp with a short position of Kratos Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Appian Corp and Kratos Defense.

Diversification Opportunities for Appian Corp and Kratos Defense

0.41

Correlation Coefficient

Appian Corp  Kratos Defense

Very weak diversification

The 3 months correlation between Appian and Kratos is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Appian 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 Appian Corp 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 Appian 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 Appian Corp i.e., Appian Corp and Kratos Defense go up and down completely randomly.

Pair Corralation between Appian Corp and Kratos Defense

Given the investment horizon of 90 days Appian Corp is expected to generate 2.79 times less return on investment than Kratos Defense. In addition to that, Appian Corp is 1.22 times more volatile than Kratos Defense Security. It trades about 0.03 of its total potential returns per unit of risk. Kratos Defense Security is currently generating about 0.1 per unit of volatility. If you would invest  2,043  in Kratos Defense Security on October 7, 2024 and sell it today you would earn a total of  705.00  from holding Kratos Defense Security or generate 34.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Appian Corp  vs.  Kratos Defense Security

Appian Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Appian Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Appian Corp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Kratos Defense Security

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kratos Defense Security are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kratos Defense unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Appian Corp and Kratos Defense

The main advantage of trading using opposite Appian Corp and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Appian Corp 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.

The idea behind Appian Corp and Kratos Defense Security pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Stocks Directory module to find actively traded stocks across global markets.