Correlation Between Brookfield Corp and KKR Co

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

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

Diversification Opportunities for Brookfield Corp and KKR Co

0.96

Correlation Coefficient

Brookfield Corp  KKR Co

Almost no diversification

The 3 months correlation between Brookfield and KKR is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Corp 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 Brookfield Corp 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 Brookfield Corp 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 Brookfield Corp i.e., Brookfield Corp and KKR Co go up and down completely randomly.

Pair Corralation between Brookfield Corp and KKR Co

Allowing for the 90-day total investment horizon Brookfield Corp is expected to generate 1.29 times less return on investment than KKR Co. But when comparing it to its historical volatility, Brookfield Corp is 1.18 times less risky than KKR Co. It trades about 0.21 of its potential returns per unit of risk. KKR Co LP is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  12,361  in KKR Co LP on August 30, 2024 and sell it today you would earn a total of  3,642  from holding KKR Co LP or generate 29.46% return on investment over 90 days.

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

Brookfield Corp  vs.  KKR Co LP

Brookfield Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Brookfield Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

KKR Co LP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Brookfield Corp and KKR Co

The main advantage of trading using opposite Brookfield Corp and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Corp 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 Brookfield Corp 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.