Correlation Between FS KKR and PACIFIC

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

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

Diversification Opportunities for FS KKR and PACIFIC

-0.42

Correlation Coefficient

FS KKR  PACIFIC

Very good diversification

The 3 months correlation between FSK and PACIFIC is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding FS KKR Capital and PACIFIC GAS ELECTRIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS ELECTRIC and FS KKR 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 FS KKR Capital are associated (or correlated) with PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS ELECTRIC has no effect on the direction of FS KKR i.e., FS KKR and PACIFIC go up and down completely randomly.

Pair Corralation between FS KKR and PACIFIC

Considering the 90-day investment horizon FS KKR is expected to generate 17.73 times less return on investment than PACIFIC. But when comparing it to its historical volatility, FS KKR Capital is 42.97 times less risky than PACIFIC. It trades about 0.1 of its potential returns per unit of risk. PACIFIC GAS ELECTRIC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,632  in PACIFIC GAS ELECTRIC on September 23, 2024 and sell it today you would lose (122.00) from holding PACIFIC GAS ELECTRIC or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.99%
Values	Daily Returns

FS KKR Capital  vs.  PACIFIC GAS ELECTRIC

FS KKR Capital

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, FS KKR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PACIFIC GAS ELECTRIC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PACIFIC GAS ELECTRIC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PACIFIC GAS ELECTRIC investors.

Pair Trading with FS KKR and PACIFIC

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

The idea behind FS KKR Capital and PACIFIC GAS ELECTRIC 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.