Correlation Between NYSE Composite and KKR Co

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Can any of the company-specific risk be diversified away by investing in both NYSE Composite and KKR Co 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 NYSE Composite and KKR Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and KKR Co LP, you can compare the effects of market volatilities on NYSE Composite and KKR Co 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 NYSE Composite with a short position of KKR Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and KKR Co.

Diversification Opportunities for NYSE Composite and KKR Co

0.57
  Correlation Coefficient

Very weak diversification

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

Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.43 times more return on investment than KKR Co. However, NYSE Composite is 2.31 times less risky than KKR Co. It trades about 0.0 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.01 per unit of risk. If you would invest  1,672,276  in NYSE Composite on November 4, 2022 and sell it today you would lose (60,151)  from holding NYSE Composite or give up 3.6% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

NYSE Composite  vs.  KKR Co LP

 Performance (%) 
       Timeline  

NYSE Composite and KKR Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NYSE Composite and KKR Co

The main advantage of trading using opposite NYSE Composite and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, KKR Co 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 KKR Co will offset losses from the drop in KKR Co's long position.
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The idea behind NYSE Composite and KKR Co LP 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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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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