Correlation Between Kratos Defense and Commerce Bancshares

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

Diversification Opportunities for Kratos Defense and Commerce Bancshares

0.08

Correlation Coefficient

Kratos Defense  Commerce Bancshares

Significant diversification

The 3 months correlation between Kratos and Commerce is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Commerce Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Bancshares 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 Commerce Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Bancshares has no effect on the direction of Kratos Defense i.e., Kratos Defense and Commerce Bancshares go up and down completely randomly.

Pair Corralation between Kratos Defense and Commerce Bancshares

Given the investment horizon of 90 days Kratos Defense Security is expected to generate 2.46 times more return on investment than Commerce Bancshares. However, Kratos Defense is 2.46 times more volatile than Commerce Bancshares. It trades about 0.09 of its potential returns per unit of risk. Commerce Bancshares is currently generating about -0.07 per unit of risk. If you would invest  6,481  in Kratos Defense Security on September 5, 2025 and sell it today you would earn a total of  1,292  from holding Kratos Defense Security or generate 19.94% return on investment over 90 days.

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

Kratos Defense Security  vs.  Commerce Bancshares

Kratos Defense Security

Risk-Adjusted Performance

Mild

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

Commerce Bancshares

Risk-Adjusted Performance

Weakest

Over the last 90 days Commerce Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Kratos Defense and Commerce Bancshares

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

The idea behind Kratos Defense Security and Commerce Bancshares 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.