Correlation Between Allegion PLC and Knightscope

Can any of the company-specific risk be diversified away by investing in both Allegion PLC and Knightscope 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 Allegion PLC and Knightscope into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Allegion PLC and Knightscope, you can compare the effects of market volatilities on Allegion PLC and Knightscope 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 Allegion PLC with a short position of Knightscope. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allegion PLC and Knightscope.

Diversification Opportunities for Allegion PLC and Knightscope

-0.39

Correlation Coefficient

Allegion PLC  Knightscope

Very good diversification

The 3 months correlation between Allegion and Knightscope is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Allegion PLC and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope and Allegion PLC 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 Allegion PLC are associated (or correlated) with Knightscope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knightscope has no effect on the direction of Allegion PLC i.e., Allegion PLC and Knightscope go up and down completely randomly.

Pair Corralation between Allegion PLC and Knightscope

Given the investment horizon of 90 days Allegion PLC is expected to generate 50.77 times less return on investment than Knightscope. But when comparing it to its historical volatility, Allegion PLC is 11.68 times less risky than Knightscope. It trades about 0.02 of its potential returns per unit of risk. Knightscope is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  980.00  in Knightscope on September 12, 2024 and sell it today you would earn a total of  421.00  from holding Knightscope or generate 42.96% return on investment over 90 days.

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

Allegion PLC  vs.  Knightscope

Allegion PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allegion PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Allegion PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Knightscope

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knightscope are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Knightscope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Allegion PLC and Knightscope

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

The idea behind Allegion PLC and Knightscope 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 Transaction History module to view history of all your transactions and understand their impact on performance.