Correlation Between Kainos Group and Shopify

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

Diversification Opportunities for Kainos Group and Shopify

-0.56

Correlation Coefficient

Kainos Group  Shopify

Excellent diversification

The 3 months correlation between Kainos and Shopify is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Kainos Group plc and Shopify in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify has no effect on the direction of Kainos Group i.e., Kainos Group and Shopify go up and down completely randomly.

Pair Corralation between Kainos Group and Shopify

Assuming the 90 days horizon Kainos Group is expected to generate 14.37 times less return on investment than Shopify. In addition to that, Kainos Group is 2.56 times more volatile than Shopify. It trades about 0.01 of its total potential returns per unit of risk. Shopify is currently generating about 0.27 per unit of volatility. If you would invest  10,588  in Shopify on September 19, 2024 and sell it today you would earn a total of  1,214  from holding Shopify or generate 11.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Kainos Group plc  vs.  Shopify

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.

Shopify

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kainos Group and Shopify

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

The idea behind Kainos Group plc and Shopify 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.