Correlation Between KKR Co and Goldman Sachs

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

Diversification Opportunities for KKR Co and Goldman Sachs

0.74

Correlation Coefficient

KKR Co  Goldman Sachs

Poor diversification

The 3 months correlation between KKR and Goldman is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and The Goldman Sachs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Goldman Sachs 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 Goldman Sachs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Goldman Sachs has no effect on the direction of KKR Co i.e., KKR Co and Goldman Sachs go up and down completely randomly.

Pair Corralation between KKR Co and Goldman Sachs

Assuming the 90 days trading horizon KKR Co LP is expected to generate 1.33 times more return on investment than Goldman Sachs. However, KKR Co is 1.33 times more volatile than The Goldman Sachs. It trades about 0.09 of its potential returns per unit of risk. The Goldman Sachs is currently generating about 0.08 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	Significant
Accuracy	100.0%
Values	Daily Returns

KKR Co LP  vs.  The Goldman Sachs

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.

Goldman Sachs

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Goldman Sachs are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Goldman Sachs reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KKR Co and Goldman Sachs

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

The idea behind KKR Co LP and The Goldman Sachs 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.