Correlation Between CF Acquisition and KKR Co

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

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

Diversification Opportunities for CF Acquisition and KKR Co

0.87

Correlation Coefficient

CF Acquisition  KKR Co

Very poor diversification

The 3 months correlation between CFFS and KKR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CF Acquisition VII 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 CF Acquisition 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 CF Acquisition VII 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 CF Acquisition i.e., CF Acquisition and KKR Co go up and down completely randomly.

Pair Corralation between CF Acquisition and KKR Co

Given the investment horizon of 90 days CF Acquisition is expected to generate 22.84 times less return on investment than KKR Co. But when comparing it to its historical volatility, CF Acquisition VII is 9.25 times less risky than KKR Co. It trades about 0.12 of its potential returns per unit of risk. KKR Co LP is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  11,812  in KKR Co LP on September 2, 2024 and sell it today you would earn a total of  4,475  from holding KKR Co LP or generate 37.89% return on investment over 90 days.

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

CF Acquisition VII  vs.  KKR Co LP

CF Acquisition VII

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CF Acquisition VII are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CF Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

KKR Co LP

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Acquisition and KKR Co

The main advantage of trading using opposite CF Acquisition and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Acquisition 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.

The idea behind CF Acquisition VII 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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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.