Correlation Between Macquarie Group and KKR Co

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

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

Diversification Opportunities for Macquarie Group and KKR Co

0.66

Correlation Coefficient

Macquarie Group  KKR Co

Poor diversification

The 3 months correlation between Macquarie and KKR is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Macquarie Group Limited 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 Macquarie Group 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 Macquarie Group Limited 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 Macquarie Group i.e., Macquarie Group and KKR Co go up and down completely randomly.

Pair Corralation between Macquarie Group and KKR Co

Assuming the 90 days horizon Macquarie Group is expected to generate 4.93 times less return on investment than KKR Co. But when comparing it to its historical volatility, Macquarie Group Limited is 1.61 times less risky than KKR Co. It trades about 0.11 of its potential returns per unit of risk. KKR Co LP is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  12,680  in KKR Co LP on September 1, 2024 and sell it today you would earn a total of  2,618  from holding KKR Co LP or generate 20.65% return on investment over 90 days.

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

Macquarie Group Limited  vs.  KKR Co LP

Macquarie Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Macquarie Group Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Macquarie Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

KKR Co LP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 19 (%) 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 Macquarie Group and KKR Co

The main advantage of trading using opposite Macquarie Group and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Macquarie Group 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 Macquarie Group Limited 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.