Correlation Between Kratos Defense and Alta Equipment

Can any of the company-specific risk be diversified away by investing in both Kratos Defense and Alta Equipment 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 Alta Equipment 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 Alta Equipment Group, you can compare the effects of market volatilities on Kratos Defense and Alta Equipment 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 Alta Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kratos Defense and Alta Equipment.

Diversification Opportunities for Kratos Defense and Alta Equipment

0.87

Correlation Coefficient

Kratos Defense  Alta Equipment

Very poor diversification

The 3 months correlation between Kratos and Alta is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Alta Equipment Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Equipment Group 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 Alta Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Equipment Group has no effect on the direction of Kratos Defense i.e., Kratos Defense and Alta Equipment go up and down completely randomly.

Pair Corralation between Kratos Defense and Alta Equipment

Given the investment horizon of 90 days Kratos Defense is expected to generate 1.01 times less return on investment than Alta Equipment. But when comparing it to its historical volatility, Kratos Defense Security is 1.28 times less risky than Alta Equipment. It trades about 0.22 of its potential returns per unit of risk. Alta Equipment Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  480.00  in Alta Equipment Group on May 5, 2025 and sell it today you would earn a total of  266.00  from holding Alta Equipment Group or generate 55.42% return on investment over 90 days.

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

Kratos Defense Security  vs.  Alta Equipment Group

Kratos Defense Security

Risk-Adjusted Performance

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 weak basic indicators, Kratos Defense unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alta Equipment Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alta Equipment Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Alta Equipment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kratos Defense and Alta Equipment

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

The idea behind Kratos Defense Security and Alta Equipment Group 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.