Correlation Between Kainos Group and MicroStrategy Incorporated

Can any of the company-specific risk be diversified away by investing in both Kainos Group and MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 MicroStrategy Incorporated, you can compare the effects of market volatilities on Kainos Group and MicroStrategy Incorporated 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 MicroStrategy Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kainos Group and MicroStrategy Incorporated.

Diversification Opportunities for Kainos Group and MicroStrategy Incorporated

-0.64

Correlation Coefficient

Kainos Group  MicroStrategy Incorporated

Excellent diversification

The 3 months correlation between Kainos and MicroStrategy is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Kainos Group plc and MicroStrategy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroStrategy Incorporated 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 MicroStrategy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroStrategy Incorporated has no effect on the direction of Kainos Group i.e., Kainos Group and MicroStrategy Incorporated go up and down completely randomly.

Pair Corralation between Kainos Group and MicroStrategy Incorporated

Assuming the 90 days horizon Kainos Group is expected to generate 26.93 times less return on investment than MicroStrategy Incorporated. In addition to that, Kainos Group is 1.13 times more volatile than MicroStrategy Incorporated. It trades about 0.0 of its total potential returns per unit of risk. MicroStrategy Incorporated is currently generating about 0.14 per unit of volatility. If you would invest  1,416  in MicroStrategy Incorporated on September 20, 2024 and sell it today you would earn a total of  32,602  from holding MicroStrategy Incorporated or generate 2302.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Kainos Group plc  vs.  MicroStrategy Incorporated

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 abnormal 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.

MicroStrategy Incorporated

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Kainos Group and MicroStrategy Incorporated

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

The idea behind Kainos Group plc and MicroStrategy Incorporated 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.