Correlation Between KKR Co and Moodys

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

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

Diversification Opportunities for KKR Co and Moodys

0.86

Correlation Coefficient

KKR Co  Moodys

Very poor diversification

The 3 months correlation between KKR and Moodys is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys and KKR Co 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 KKR Co LP are associated (or correlated) with Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of KKR Co i.e., KKR Co and Moodys go up and down completely randomly.

Pair Corralation between KKR Co and Moodys

Assuming the 90 days trading horizon KKR Co LP is expected to generate 1.25 times more return on investment than Moodys. However, KKR Co is 1.25 times more volatile than Moodys. It trades about 0.09 of its potential returns per unit of risk. Moodys is currently generating about 0.06 per unit of risk. If you would invest  4,171  in KKR Co LP on March 8, 2024 and sell it today you would earn a total of  5,138  from holding KKR Co LP or generate 123.18% return on investment over 90 days.

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

KKR Co LP  vs.  Moodys

KKR Co LP

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, KKR Co is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Moodys

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moodys are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Moodys is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KKR Co and Moodys

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

The idea behind KKR Co LP and Moodys 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.