Correlation Between ARES MREAL and KKR REAL

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

By analyzing existing cross correlation between ARES MREAL ESTDL 01 and KKR REAL ESTFINTR, you can compare the effects of market volatilities on ARES MREAL and KKR REAL 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 ARES MREAL with a short position of KKR REAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of ARES MREAL and KKR REAL.

Diversification Opportunities for ARES MREAL and KKR REAL

0.55

Correlation Coefficient

ARES MREAL  KKR REAL

Very weak diversification

The 3 months correlation between ARES and KKR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding ARES MREAL ESTDL 01 and KKR REAL ESTFINTR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR REAL ESTFINTR and ARES MREAL 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 ARES MREAL ESTDL 01 are associated (or correlated) with KKR REAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR REAL ESTFINTR has no effect on the direction of ARES MREAL i.e., ARES MREAL and KKR REAL go up and down completely randomly.

Pair Corralation between ARES MREAL and KKR REAL

Assuming the 90 days horizon ARES MREAL ESTDL 01 is expected to under-perform the KKR REAL. In addition to that, ARES MREAL is 1.07 times more volatile than KKR REAL ESTFINTR. It trades about -0.03 of its total potential returns per unit of risk. KKR REAL ESTFINTR is currently generating about -0.01 per unit of volatility. If you would invest  1,165  in KKR REAL ESTFINTR on October 26, 2024 and sell it today you would lose (185.00) from holding KKR REAL ESTFINTR or give up 15.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

ARES MREAL ESTDL 01  vs.  KKR REAL ESTFINTR

ARES MREAL ESTDL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARES MREAL ESTDL 01 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ARES MREAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KKR REAL ESTFINTR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ARES MREAL and KKR REAL

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

The idea behind ARES MREAL ESTDL 01 and KKR REAL ESTFINTR 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.