Correlation Between Kratos Defense and Planet Labs

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

Diversification Opportunities for Kratos Defense and Planet Labs

0.48

Correlation Coefficient

Kratos Defense  Planet Labs

Very weak diversification

The 3 months correlation between Kratos and Planet is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Kratos Defense Security and Planet Labs PBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planet Labs PBC 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 Planet Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planet Labs PBC has no effect on the direction of Kratos Defense i.e., Kratos Defense and Planet Labs go up and down completely randomly.

Pair Corralation between Kratos Defense and Planet Labs

Given the investment horizon of 90 days Kratos Defense Security is expected to generate 0.64 times more return on investment than Planet Labs. However, Kratos Defense Security is 1.56 times less risky than Planet Labs. It trades about 0.08 of its potential returns per unit of risk. Planet Labs PBC is currently generating about -0.02 per unit of risk. If you would invest  983.00  in Kratos Defense Security on June 29, 2024 and sell it today you would earn a total of  1,369  from holding Kratos Defense Security or generate 139.27% return on investment over 90 days.

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

Kratos Defense Security  vs.  Planet Labs PBC

Kratos Defense Security

Risk-Adjusted Performance

10 of 100

OK

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

Planet Labs PBC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Planet Labs PBC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Planet Labs disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kratos Defense and Planet Labs

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

The idea behind Kratos Defense Security and Planet Labs PBC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.