Correlation Between Knightscope and ASSA ABLOY

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

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

Diversification Opportunities for Knightscope and ASSA ABLOY

-0.67

Correlation Coefficient

Knightscope  ASSA ABLOY

Excellent diversification

The 3 months correlation between Knightscope and ASSA is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Knightscope and ASSA ABLOY AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASSA ABLOY AB 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 ASSA ABLOY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASSA ABLOY AB has no effect on the direction of Knightscope i.e., Knightscope and ASSA ABLOY go up and down completely randomly.

Pair Corralation between Knightscope and ASSA ABLOY

Given the investment horizon of 90 days Knightscope is expected to generate 6.13 times more return on investment than ASSA ABLOY. However, Knightscope is 6.13 times more volatile than ASSA ABLOY AB. It trades about 0.04 of its potential returns per unit of risk. ASSA ABLOY AB is currently generating about 0.17 per unit of risk. If you would invest  1,860  in Knightscope on September 5, 2024 and sell it today you would lose (110.00) from holding Knightscope or give up 5.91% of portfolio value over 90 days.

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

Knightscope  vs.  ASSA ABLOY AB

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

ASSA ABLOY AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASSA ABLOY AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ASSA ABLOY is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Knightscope and ASSA ABLOY

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

The idea behind Knightscope and ASSA ABLOY AB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.