Correlation Between KKR Real and Ready Capital

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

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

Diversification Opportunities for KKR Real and Ready Capital

0.56

Correlation Coefficient

KKR Real  Ready Capital

Very weak diversification

The 3 months correlation between KKR and Ready is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding KKR Real Estate and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital and KKR Real 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 Real Estate are associated (or correlated) with Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital has no effect on the direction of KKR Real i.e., KKR Real and Ready Capital go up and down completely randomly.

Pair Corralation between KKR Real and Ready Capital

Assuming the 90 days trading horizon KKR Real Estate is expected to under-perform the Ready Capital. In addition to that, KKR Real is 1.92 times more volatile than Ready Capital. It trades about -0.1 of its total potential returns per unit of risk. Ready Capital is currently generating about -0.13 per unit of volatility. If you would invest  1,926  in Ready Capital on September 26, 2024 and sell it today you would lose (83.00) from holding Ready Capital or give up 4.31% of portfolio value over 90 days.

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

KKR Real Estate  vs.  Ready Capital

KKR Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKR Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Ready Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ready Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Ready Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KKR Real and Ready Capital

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

The idea behind KKR Real Estate and Ready 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.