Correlation Between Kratos Defense and IRobot

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

Diversification Opportunities for Kratos Defense and IRobot

0.88

Correlation Coefficient

Kratos Defense  IRobot

Very poor diversification

The 3 months correlation between Kratos and IRobot is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and iRobot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iRobot 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 IRobot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iRobot has no effect on the direction of Kratos Defense i.e., Kratos Defense and IRobot go up and down completely randomly.

Pair Corralation between Kratos Defense and IRobot

Given the investment horizon of 90 days Kratos Defense is expected to generate 1.6 times less return on investment than IRobot. But when comparing it to its historical volatility, Kratos Defense Security is 2.75 times less risky than IRobot. It trades about 0.22 of its potential returns per unit of risk. iRobot is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  231.00  in iRobot on May 5, 2025 and sell it today you would earn a total of  165.00  from holding iRobot or generate 71.43% 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.  iRobot

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.

iRobot

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iRobot are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, IRobot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kratos Defense and IRobot

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

The idea behind Kratos Defense Security and iRobot 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.