Correlation Between Kratos Defense and Asia Pacific

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

Diversification Opportunities for Kratos Defense and Asia Pacific

0.7

Correlation Coefficient

Kratos Defense  Asia Pacific

Poor diversification

The 3 months correlation between Kratos and Asia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Asia Pacific Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia Pacific Investment 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 Asia Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Pacific Investment has no effect on the direction of Kratos Defense i.e., Kratos Defense and Asia Pacific go up and down completely randomly.

Pair Corralation between Kratos Defense and Asia Pacific

Given the investment horizon of 90 days Kratos Defense Security is expected to generate 0.83 times more return on investment than Asia Pacific. However, Kratos Defense Security is 1.21 times less risky than Asia Pacific. It trades about 0.24 of its potential returns per unit of risk. Asia Pacific Investment is currently generating about 0.16 per unit of risk. If you would invest  3,493  in Kratos Defense Security on May 1, 2025 and sell it today you would earn a total of  2,216  from holding Kratos Defense Security or generate 63.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Kratos Defense Security  vs.  Asia Pacific Investment

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 19 (%) 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.

Asia Pacific Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pacific Investment are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Asia Pacific displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kratos Defense and Asia Pacific

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

The idea behind Kratos Defense Security and Asia Pacific Investment 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.