Correlation Between Kratos Defense and Ammo

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

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

Diversification Opportunities for Kratos Defense and Ammo

-0.48

Correlation Coefficient

Kratos Defense  Ammo

Very good diversification

The 3 months correlation between Kratos and Ammo is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Ammo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ammo Inc and Kratos Defense 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 Kratos Defense Security are associated (or correlated) with Ammo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ammo Inc has no effect on the direction of Kratos Defense i.e., Kratos Defense and Ammo go up and down completely randomly.

Pair Corralation between Kratos Defense and Ammo

Given the investment horizon of 90 days Kratos Defense Security is expected to generate 0.7 times more return on investment than Ammo. However, Kratos Defense Security is 1.43 times less risky than Ammo. It trades about 0.13 of its potential returns per unit of risk. Ammo Inc is currently generating about -0.07 per unit of risk. If you would invest  2,184  in Kratos Defense Security on September 5, 2024 and sell it today you would earn a total of  452.00  from holding Kratos Defense Security or generate 20.7% return on investment over 90 days.

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

Kratos Defense Security  vs.  Ammo Inc

Kratos Defense Security

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kratos Defense Security are ranked lower than 9 (%) 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.

Ammo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ammo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Kratos Defense and Ammo

The main advantage of trading using opposite Kratos Defense and Ammo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kratos Defense position performs unexpectedly, Ammo 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 Ammo will offset losses from the drop in Ammo's long position.

The idea behind Kratos Defense Security and Ammo Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.