Correlation Between FirstCash and KKR Co

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

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

Diversification Opportunities for FirstCash and KKR Co

-0.47

Correlation Coefficient

FirstCash  KKR Co

Very good diversification

The 3 months correlation between FirstCash and KKR is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding FirstCash 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 FirstCash 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 FirstCash 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 FirstCash i.e., FirstCash and KKR Co go up and down completely randomly.

Pair Corralation between FirstCash and KKR Co

Given the investment horizon of 90 days FirstCash is expected to generate 0.64 times more return on investment than KKR Co. However, FirstCash is 1.55 times less risky than KKR Co. It trades about -0.07 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.08 per unit of risk. If you would invest  10,638  in FirstCash on October 9, 2024 and sell it today you would lose (231.00) from holding FirstCash or give up 2.17% of portfolio value over 90 days.

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

FirstCash  vs.  KKR Co LP

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

KKR Co LP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with FirstCash and KKR Co

The main advantage of trading using opposite FirstCash and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstCash 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 FirstCash 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..