Correlation Between Eve Holding and Kratos Defense

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

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

Diversification Opportunities for Eve Holding and Kratos Defense

0.14

Correlation Coefficient

Eve Holding  Kratos Defense

Average diversification

The 3 months correlation between Eve and Kratos is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Eve Holding 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 Eve Holding 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 Eve Holding 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 Eve Holding i.e., Eve Holding and Kratos Defense go up and down completely randomly.

Pair Corralation between Eve Holding and Kratos Defense

Given the investment horizon of 90 days Eve Holding is expected to under-perform the Kratos Defense. In addition to that, Eve Holding is 1.29 times more volatile than Kratos Defense Security. It trades about -0.09 of its total potential returns per unit of risk. Kratos Defense Security is currently generating about 0.03 per unit of volatility. If you would invest  3,275  in Kratos Defense Security on January 29, 2025 and sell it today you would earn a total of  84.00  from holding Kratos Defense Security or generate 2.56% return on investment over 90 days.

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

Eve Holding  vs.  Kratos Defense Security

Eve Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eve Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kratos Defense Security

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kratos Defense Security are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Kratos Defense may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Eve Holding and Kratos Defense

The main advantage of trading using opposite Eve Holding and Kratos Defense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eve Holding 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 Eve Holding 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.