Correlation Between Kainos Group and Applovin Corp

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

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

Diversification Opportunities for Kainos Group and Applovin Corp

-0.61

Correlation Coefficient

Kainos Group  Applovin Corp

Excellent diversification

The 3 months correlation between Kainos and Applovin is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kainos Group plc and Applovin Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applovin Corp and Kainos Group 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 Kainos Group plc are associated (or correlated) with Applovin Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applovin Corp has no effect on the direction of Kainos Group i.e., Kainos Group and Applovin Corp go up and down completely randomly.

Pair Corralation between Kainos Group and Applovin Corp

Assuming the 90 days horizon Kainos Group is expected to generate 104.56 times less return on investment than Applovin Corp. But when comparing it to its historical volatility, Kainos Group plc is 2.28 times less risky than Applovin Corp. It trades about 0.01 of its potential returns per unit of risk. Applovin Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  15,885  in Applovin Corp on September 19, 2024 and sell it today you would earn a total of  17,420  from holding Applovin Corp or generate 109.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Kainos Group plc  vs.  Applovin Corp

Kainos Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kainos Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Applovin Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applovin Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Applovin Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kainos Group and Applovin Corp

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

The idea behind Kainos Group plc and Applovin Corp 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.