Correlation Between KKR Co and Morgan Stanley

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

Diversification Opportunities for KKR Co and Morgan Stanley

0.95

Correlation Coefficient

KKR Co  Morgan Stanley

Almost no diversification

The 3 months correlation between KKR and Morgan is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley has no effect on the direction of KKR Co i.e., KKR Co and Morgan Stanley go up and down completely randomly.

Pair Corralation between KKR Co and Morgan Stanley

Assuming the 90 days trading horizon KKR Co is expected to generate 1.42 times less return on investment than Morgan Stanley. But when comparing it to its historical volatility, KKR Co LP is 1.07 times less risky than Morgan Stanley. It trades about 0.13 of its potential returns per unit of risk. Morgan Stanley is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  9,120  in Morgan Stanley on September 23, 2024 and sell it today you would earn a total of  2,430  from holding Morgan Stanley or generate 26.64% return on investment over 90 days.

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

KKR Co LP  vs.  Morgan Stanley

KKR Co LP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Morgan Stanley

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Morgan Stanley unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KKR Co and Morgan Stanley

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

The idea behind KKR Co LP and Morgan Stanley 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.