Correlation Between Morgan Stanley and KKR Co

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

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

Diversification Opportunities for Morgan Stanley and KKR Co

0.03

Correlation Coefficient

Morgan Stanley  KKR Co

Significant diversification

The 3 months correlation between Morgan and KKR is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley 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 Morgan Stanley i.e., Morgan Stanley and KKR Co go up and down completely randomly.

Pair Corralation between Morgan Stanley and KKR Co

Assuming the 90 days horizon Morgan Stanley is expected to generate 49.9 times more return on investment than KKR Co. However, Morgan Stanley is 49.9 times more volatile than KKR Co LP. It trades about 0.11 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.14 per unit of risk. If you would invest  12,070  in Morgan Stanley on December 28, 2024 and sell it today you would lose (470.00) from holding Morgan Stanley or give up 3.89% of portfolio value over 90 days.

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

Morgan Stanley  vs.  KKR Co LP

Morgan Stanley

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Morgan Stanley reported solid returns over the last few months and may actually be approaching a breakup point.

KKR Co LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days KKR Co LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Morgan Stanley and KKR Co

The main advantage of trading using opposite Morgan Stanley and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morgan Stanley 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 Morgan Stanley 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.