Correlation Between Knightscope and Alpha

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

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

Diversification Opportunities for Knightscope and Alpha

-0.53

Correlation Coefficient

Knightscope  Alpha

Excellent diversification

The 3 months correlation between Knightscope and Alpha is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Knightscope and Alpha and Omega in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha and Omega 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 Alpha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha and Omega has no effect on the direction of Knightscope i.e., Knightscope and Alpha go up and down completely randomly.

Pair Corralation between Knightscope and Alpha

Given the investment horizon of 90 days Knightscope is expected to generate 1.84 times more return on investment than Alpha. However, Knightscope is 1.84 times more volatile than Alpha and Omega. It trades about 0.1 of its potential returns per unit of risk. Alpha and Omega is currently generating about -0.01 per unit of risk. If you would invest  1,280  in Knightscope on August 30, 2024 and sell it today you would earn a total of  456.00  from holding Knightscope or generate 35.63% return on investment over 90 days.

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

Knightscope  vs.  Alpha and Omega

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 unfluctuating fundamental indicators, Knightscope reported solid returns over the last few months and may actually be approaching a breakup point.

Alpha and Omega

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha and Omega has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Alpha is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Knightscope and Alpha

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

The idea behind Knightscope and Alpha and Omega 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.