Correlation Between Carlyle Secured and FS KKR

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

By analyzing existing cross correlation between Carlyle Secured Lending and FS KKR Capital, you can compare the effects of market volatilities on Carlyle Secured and FS KKR 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 Carlyle Secured with a short position of FS KKR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle Secured and FS KKR.

Diversification Opportunities for Carlyle Secured and FS KKR

0.4

Correlation Coefficient

Carlyle Secured  FS KKR

Very weak diversification

The 3 months correlation between Carlyle and FSK is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Secured Lending and FS KKR Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS KKR Capital and Carlyle Secured 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 Carlyle Secured Lending are associated (or correlated) with FS KKR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS KKR Capital has no effect on the direction of Carlyle Secured i.e., Carlyle Secured and FS KKR go up and down completely randomly.

Pair Corralation between Carlyle Secured and FS KKR

Given the investment horizon of 90 days Carlyle Secured Lending is expected to under-perform the FS KKR. But the stock apears to be less risky and, when comparing its historical volatility, Carlyle Secured Lending is 1.06 times less risky than FS KKR. The stock trades about -0.06 of its potential returns per unit of risk. The FS KKR Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,098  in FS KKR Capital on December 27, 2024 and sell it today you would earn a total of  11.00  from holding FS KKR Capital or generate 0.52% return on investment over 90 days.

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

Carlyle Secured Lending  vs.  FS KKR Capital

Carlyle Secured Lending

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlyle Secured Lending has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Carlyle Secured is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

FS KKR Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FS KKR is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Carlyle Secured and FS KKR

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

The idea behind Carlyle Secured Lending and FS KKR Capital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.