Correlation Between Kratos Defense and Cisco Systems

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

Diversification Opportunities for Kratos Defense and Cisco Systems

0.69

Correlation Coefficient

Kratos Defense  Cisco Systems

Poor diversification

The 3 months correlation between Kratos and Cisco is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems 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 Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Kratos Defense i.e., Kratos Defense and Cisco Systems go up and down completely randomly.

Pair Corralation between Kratos Defense and Cisco Systems

Given the investment horizon of 90 days Kratos Defense Security is expected to generate 2.75 times more return on investment than Cisco Systems. However, Kratos Defense is 2.75 times more volatile than Cisco Systems. It trades about 0.24 of its potential returns per unit of risk. Cisco Systems is currently generating about 0.17 per unit of risk. If you would invest  3,588  in Kratos Defense Security on May 3, 2025 and sell it today you would earn a total of  2,282  from holding Kratos Defense Security or generate 63.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.31%
Values	Daily Returns

Kratos Defense Security  vs.  Cisco Systems

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.

Cisco Systems

Risk-Adjusted Performance

Good

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

Pair Trading with Kratos Defense and Cisco Systems

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

The idea behind Kratos Defense Security and Cisco Systems 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.