Correlation Between Terran Orbital and Kratos Defense

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

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

Diversification Opportunities for Terran Orbital and Kratos Defense

0.0

Correlation Coefficient

Terran Orbital  Kratos Defense

Pay attention - limited upside

The 3 months correlation between Terran and Kratos is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Terran Orbital 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 Terran Orbital 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 Terran Orbital 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 Terran Orbital i.e., Terran Orbital and Kratos Defense go up and down completely randomly.

Pair Corralation between Terran Orbital and Kratos Defense

If you would invest  2,723  in Kratos Defense Security on October 10, 2024 and sell it today you would earn a total of  138.00  from holding Kratos Defense Security or generate 5.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Terran Orbital Corp  vs.  Kratos Defense Security

Terran Orbital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terran Orbital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Terran Orbital 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

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kratos Defense Security are ranked lower than 7 (%) 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 Terran Orbital and Kratos Defense

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

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.