Correlation Between MSCI and KKR Co

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

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

Diversification Opportunities for MSCI and KKR Co

0.81

Correlation Coefficient

MSCI  KKR Co

Very poor diversification

The 3 months correlation between MSCI and KKR is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding MSCI Inc and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP and MSCI 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 MSCI Inc are associated (or correlated) with KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of MSCI i.e., MSCI and KKR Co go up and down completely randomly.

Pair Corralation between MSCI and KKR Co

Assuming the 90 days horizon MSCI is expected to generate 4.25 times less return on investment than KKR Co. But when comparing it to its historical volatility, MSCI Inc is 1.12 times less risky than KKR Co. It trades about 0.03 of its potential returns per unit of risk. KKR Co LP is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,475  in KKR Co LP on September 3, 2024 and sell it today you would earn a total of  10,823  from holding KKR Co LP or generate 241.85% return on investment over 90 days.

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

MSCI Inc  vs.  KKR Co LP

MSCI Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MSCI Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KKR Co LP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 21 (%) 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.

Pair Trading with MSCI and KKR Co

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

The idea behind MSCI Inc and KKR Co LP 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 Transaction History module to view history of all your transactions and understand their impact on performance.