Correlation Between Astra Space and Kratos Defense

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

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

Diversification Opportunities for Astra Space and Kratos Defense

-0.54

Correlation Coefficient

Astra Space  Kratos Defense

Excellent diversification

The 3 months correlation between Astra and Kratos is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Astra Space 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 Astra Space 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 Astra Space 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 Astra Space i.e., Astra Space and Kratos Defense go up and down completely randomly.

Pair Corralation between Astra Space and Kratos Defense

If you would invest  2,395  in Kratos Defense Security on October 25, 2024 and sell it today you would earn a total of  1,127  from holding Kratos Defense Security or generate 47.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.69%
Values	Daily Returns

Astra Space  vs.  Kratos Defense Security

Astra Space

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Astra Space has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Astra Space is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Kratos Defense Security

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kratos Defense Security are ranked lower than 17 (%) 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 Astra Space and Kratos Defense

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

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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.