Correlation Between NAPCO Security and Guardforce

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

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

Diversification Opportunities for NAPCO Security and Guardforce

0.06

Correlation Coefficient

NAPCO Security  Guardforce

Significant diversification

The 3 months correlation between NAPCO and Guardforce is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Guardforce AI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardforce AI and NAPCO Security 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 NAPCO Security Technologies are associated (or correlated) with Guardforce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardforce AI has no effect on the direction of NAPCO Security i.e., NAPCO Security and Guardforce go up and down completely randomly.

Pair Corralation between NAPCO Security and Guardforce

Given the investment horizon of 90 days NAPCO Security Technologies is expected to under-perform the Guardforce. But the stock apears to be less risky and, when comparing its historical volatility, NAPCO Security Technologies is 3.51 times less risky than Guardforce. The stock trades about -0.18 of its potential returns per unit of risk. The Guardforce AI Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  129.00  in Guardforce AI Co on December 2, 2024 and sell it today you would lose (14.00) from holding Guardforce AI Co or give up 10.85% of portfolio value over 90 days.

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

NAPCO Security Technologies  vs.  Guardforce AI Co

NAPCO Security Techn

Risk-Adjusted Performance

Very Weak

Over the last 90 days NAPCO Security Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Guardforce AI

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guardforce AI Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Guardforce demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NAPCO Security and Guardforce

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

The idea behind NAPCO Security Technologies and Guardforce AI Co 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.