Correlation Between Infinera and Knightscope

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

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

Diversification Opportunities for Infinera and Knightscope

-0.42

Correlation Coefficient

Infinera  Knightscope

Very good diversification

The 3 months correlation between Infinera and Knightscope is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Infinera and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope and Infinera 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 Infinera 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 Infinera i.e., Infinera and Knightscope go up and down completely randomly.

Pair Corralation between Infinera and Knightscope

Given the investment horizon of 90 days Infinera is expected to generate 0.04 times more return on investment than Knightscope. However, Infinera is 25.07 times less risky than Knightscope. It trades about -0.02 of its potential returns per unit of risk. Knightscope is currently generating about -0.12 per unit of risk. If you would invest  661.00  in Infinera on September 21, 2024 and sell it today you would lose (1.00) from holding Infinera or give up 0.15% of portfolio value over 90 days.

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

Infinera  vs.  Knightscope

Infinera

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infinera has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Infinera is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 Infinera and Knightscope

The main advantage of trading using opposite Infinera and Knightscope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Infinera 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 Infinera 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 Global Correlations module to find global opportunities by holding instruments from different markets.