Correlation Between First Responder and Knightscope

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

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

Diversification Opportunities for First Responder and Knightscope

-0.65

Correlation Coefficient

First Responder  Knightscope

Excellent diversification

The 3 months correlation between First and Knightscope is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding First Responder Technologies and Knightscope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knightscope and First Responder 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 First Responder 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 First Responder i.e., First Responder and Knightscope go up and down completely randomly.

Pair Corralation between First Responder and Knightscope

Assuming the 90 days horizon First Responder Technologies is expected to generate 3.84 times more return on investment than Knightscope. However, First Responder is 3.84 times more volatile than Knightscope. It trades about 0.06 of its potential returns per unit of risk. Knightscope is currently generating about 0.11 per unit of risk. If you would invest  22.00  in First Responder Technologies on August 31, 2024 and sell it today you would lose (20.61) from holding First Responder Technologies or give up 93.68% of portfolio value over 90 days.

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

First Responder Technologies  vs.  Knightscope

First Responder Tech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Responder Technologies are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, First Responder reported solid returns over the last few months and may actually be approaching a breakup point.

Knightscope

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Knightscope are ranked lower than 8 (%) 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 First Responder and Knightscope

The main advantage of trading using opposite First Responder and Knightscope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Responder 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 First Responder 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .