Correlation Between BIO Key and Knightscope

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

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

Diversification Opportunities for BIO Key and Knightscope

0.47

Correlation Coefficient

BIO Key  Knightscope

Very weak diversification

The 3 months correlation between BIO and Knightscope is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding BIO Key International and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope and BIO Key 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 BIO Key International 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 BIO Key i.e., BIO Key and Knightscope go up and down completely randomly.

Pair Corralation between BIO Key and Knightscope

Given the investment horizon of 90 days BIO Key is expected to generate 1.69 times less return on investment than Knightscope. In addition to that, BIO Key is 1.21 times more volatile than Knightscope. It trades about 0.01 of its total potential returns per unit of risk. Knightscope is currently generating about 0.01 per unit of volatility. If you would invest  2,235  in Knightscope on September 24, 2024 and sell it today you would lose (900.00) from holding Knightscope or give up 40.27% of portfolio value over 90 days.

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

BIO Key International  vs.  Knightscope

BIO Key International

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BIO Key International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, BIO Key may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Knightscope

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knightscope are ranked lower than 15 (%) 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 BIO Key and Knightscope

The main advantage of trading using opposite BIO Key and Knightscope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BIO Key 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 BIO Key International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.