Correlation Between KKR Real and Annaly Capital

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

Diversification Opportunities for KKR Real and Annaly Capital

-0.33

Correlation Coefficient

KKR Real  Annaly Capital

Very good diversification

The 3 months correlation between KKR and Annaly is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding KKR Real Estate and Annaly Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Annaly Capital Management 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 Annaly Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Annaly Capital Management has no effect on the direction of KKR Real i.e., KKR Real and Annaly Capital go up and down completely randomly.

Pair Corralation between KKR Real and Annaly Capital

Given the investment horizon of 90 days KKR Real Estate is expected to generate 3.6 times more return on investment than Annaly Capital. However, KKR Real is 3.6 times more volatile than Annaly Capital Management. It trades about 0.05 of its potential returns per unit of risk. Annaly Capital Management is currently generating about 0.01 per unit of risk. If you would invest  1,133  in KKR Real Estate on September 3, 2024 and sell it today you would earn a total of  39.00  from holding KKR Real Estate or generate 3.44% return on investment over 90 days.

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

KKR Real Estate  vs.  Annaly Capital Management

KKR Real Estate

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, KKR Real is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Annaly Capital Management

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Annaly Capital Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Annaly Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KKR Real and Annaly Capital

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

The idea behind KKR Real Estate and Annaly Capital Management 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.