Correlation Between NAPCO Security and Knightscope

Can any of the company-specific risk be diversified away by investing in both NAPCO Security 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 NAPCO Security and Knightscope 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 Knightscope, you can compare the effects of market volatilities on NAPCO Security 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 NAPCO Security with a short position of Knightscope. Check out your portfolio center. Please also check ongoing floating volatility patterns of NAPCO Security and Knightscope.

Diversification Opportunities for NAPCO Security and Knightscope

0.81

Correlation Coefficient

NAPCO Security  Knightscope

Very poor diversification

The 3 months correlation between NAPCO and Knightscope is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding NAPCO Security Technologies and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope 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 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 NAPCO Security i.e., NAPCO Security and Knightscope go up and down completely randomly.

Pair Corralation between NAPCO Security and Knightscope

Given the investment horizon of 90 days NAPCO Security Technologies is expected to generate 0.58 times more return on investment than Knightscope. However, NAPCO Security Technologies is 1.72 times less risky than Knightscope. It trades about -0.15 of its potential returns per unit of risk. Knightscope is currently generating about -0.33 per unit of risk. If you would invest  3,520  in NAPCO Security Technologies on December 29, 2024 and sell it today you would lose (1,210) from holding NAPCO Security Technologies or give up 34.38% of portfolio value over 90 days.

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

NAPCO Security Technologies  vs.  Knightscope

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.

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.

Pair Trading with NAPCO Security and Knightscope

The main advantage of trading using opposite NAPCO Security and Knightscope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NAPCO Security 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 NAPCO Security Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.