Correlation Between KKR Co and China International

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

Diversification Opportunities for KKR Co and China International

0.6

Correlation Coefficient

KKR Co  China International

Poor diversification

The 3 months correlation between KKR and China is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and China International Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China International 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 China International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China International has no effect on the direction of KKR Co i.e., KKR Co and China International go up and down completely randomly.

Pair Corralation between KKR Co and China International

Assuming the 90 days trading horizon KKR Co LP is expected to generate 0.31 times more return on investment than China International. However, KKR Co LP is 3.21 times less risky than China International. It trades about 0.25 of its potential returns per unit of risk. China International Capital is currently generating about -0.11 per unit of risk. If you would invest  11,993  in KKR Co LP on September 5, 2024 and sell it today you would earn a total of  3,007  from holding KKR Co LP or generate 25.07% 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.  China International Capital

KKR Co LP

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

China International

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in China International Capital are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, China International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KKR Co and China International

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

The idea behind KKR Co LP and China International Capital 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.