Correlation Between Knightscope and ADT

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

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

Diversification Opportunities for Knightscope and ADT

-0.79

Correlation Coefficient

Knightscope  ADT

Pay attention - limited upside

The 3 months correlation between Knightscope and ADT is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Knightscope and ADT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADT Inc and Knightscope 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 Knightscope are associated (or correlated) with ADT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADT Inc has no effect on the direction of Knightscope i.e., Knightscope and ADT go up and down completely randomly.

Pair Corralation between Knightscope and ADT

Given the investment horizon of 90 days Knightscope is expected to under-perform the ADT. In addition to that, Knightscope is 3.38 times more volatile than ADT Inc. It trades about -0.33 of its total potential returns per unit of risk. ADT Inc is currently generating about 0.15 per unit of volatility. If you would invest  684.00  in ADT Inc on December 29, 2024 and sell it today you would earn a total of  126.00  from holding ADT Inc or generate 18.42% return on investment over 90 days.

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

Knightscope  vs.  ADT Inc

Knightscope

Risk-Adjusted Performance

Very Weak

Over the last 90 days Knightscope has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

ADT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ADT Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental indicators, ADT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Knightscope and ADT

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

The idea behind Knightscope and ADT Inc 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.