Correlation Between Kainos Group and ServiceNow

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

Diversification Opportunities for Kainos Group and ServiceNow

-0.57

Correlation Coefficient

Kainos Group  ServiceNow

Excellent diversification

The 3 months correlation between Kainos and ServiceNow is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kainos Group plc and ServiceNow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServiceNow 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 ServiceNow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServiceNow has no effect on the direction of Kainos Group i.e., Kainos Group and ServiceNow go up and down completely randomly.

Pair Corralation between Kainos Group and ServiceNow

Assuming the 90 days horizon Kainos Group plc is expected to under-perform the ServiceNow. In addition to that, Kainos Group is 2.85 times more volatile than ServiceNow. It trades about -0.1 of its total potential returns per unit of risk. ServiceNow is currently generating about 0.17 per unit of volatility. If you would invest  93,736  in ServiceNow on September 20, 2024 and sell it today you would earn a total of  17,736  from holding ServiceNow or generate 18.92% return on investment over 90 days.

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

Kainos Group plc  vs.  ServiceNow

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.

ServiceNow

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ServiceNow are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, ServiceNow showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kainos Group and ServiceNow

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

The idea behind Kainos Group plc and ServiceNow 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.