Correlation Between Knightscope and Applied Materials

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

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

Diversification Opportunities for Knightscope and Applied Materials

-0.14

Correlation Coefficient

Knightscope  Applied Materials

Good diversification

The 3 months correlation between Knightscope and Applied is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Knightscope and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of Knightscope i.e., Knightscope and Applied Materials go up and down completely randomly.

Pair Corralation between Knightscope and Applied Materials

Given the investment horizon of 90 days Knightscope is expected to under-perform the Applied Materials. In addition to that, Knightscope is 2.29 times more volatile than Applied Materials. It trades about -0.27 of its total potential returns per unit of risk. Applied Materials is currently generating about -0.02 per unit of volatility. If you would invest  17,431  in Applied Materials on November 28, 2024 and sell it today you would lose (877.00) from holding Applied Materials or give up 5.03% of portfolio value over 90 days.

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

Knightscope  vs.  Applied Materials

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 March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Applied Materials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Applied Materials is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Knightscope and Applied Materials

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

The idea behind Knightscope and Applied Materials 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.