Correlation Between Brady and Knightscope

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

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

Diversification Opportunities for Brady and Knightscope

-0.21

Correlation Coefficient

Brady  Knightscope

Very good diversification

The 3 months correlation between Brady and Knightscope is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Brady and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope and Brady 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 Brady 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 Brady i.e., Brady and Knightscope go up and down completely randomly.

Pair Corralation between Brady and Knightscope

Considering the 90-day investment horizon Brady is expected to generate 52.28 times less return on investment than Knightscope. But when comparing it to its historical volatility, Brady is 6.35 times less risky than Knightscope. It trades about 0.08 of its potential returns per unit of risk. Knightscope is currently generating about 0.65 of returns per unit of risk over similar time horizon. If you would invest  742.00  in Knightscope on August 12, 2024 and sell it today you would earn a total of  1,718  from holding Knightscope or generate 231.54% return on investment over 90 days.

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

Brady  vs.  Knightscope

Brady

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Brady are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Brady may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Knightscope

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Knightscope are ranked lower than 14 (%) 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 Brady and Knightscope

The main advantage of trading using opposite Brady and Knightscope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brady 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 Brady 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.