Correlation Between Liberty Defense and Knightscope

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

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

Diversification Opportunities for Liberty Defense and Knightscope

-0.55

Correlation Coefficient

Liberty Defense  Knightscope

Excellent diversification

The 3 months correlation between Liberty and Knightscope is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Defense Holdings and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope and Liberty Defense 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 Liberty Defense Holdings 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 Liberty Defense i.e., Liberty Defense and Knightscope go up and down completely randomly.

Pair Corralation between Liberty Defense and Knightscope

Assuming the 90 days horizon Liberty Defense Holdings is expected to under-perform the Knightscope. But the otc stock apears to be less risky and, when comparing its historical volatility, Liberty Defense Holdings is 1.07 times less risky than Knightscope. The otc stock trades about -0.12 of its potential returns per unit of risk. The Knightscope is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,860  in Knightscope on September 4, 2024 and sell it today you would lose (160.00) from holding Knightscope or give up 8.6% of portfolio value over 90 days.

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

Liberty Defense Holdings  vs.  Knightscope

Liberty Defense Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liberty Defense Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Knightscope

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knightscope are ranked lower than 9 (%) 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 Liberty Defense and Knightscope

The main advantage of trading using opposite Liberty Defense and Knightscope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Defense 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 Liberty Defense Holdings 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.