Correlation Between FS KKR and CaliberCos

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

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

Diversification Opportunities for FS KKR and CaliberCos

0.15

Correlation Coefficient

FS KKR  CaliberCos

Average diversification

The 3 months correlation between FSK and CaliberCos is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding FS KKR Capital and CaliberCos Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaliberCos Class A and FS KKR 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 FS KKR Capital are associated (or correlated) with CaliberCos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaliberCos Class A has no effect on the direction of FS KKR i.e., FS KKR and CaliberCos go up and down completely randomly.

Pair Corralation between FS KKR and CaliberCos

Considering the 90-day investment horizon FS KKR is expected to generate 50.71 times less return on investment than CaliberCos. But when comparing it to its historical volatility, FS KKR Capital is 4.39 times less risky than CaliberCos. It trades about 0.01 of its potential returns per unit of risk. CaliberCos Class A is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  52.00  in CaliberCos Class A on December 19, 2024 and sell it today you would earn a total of  13.00  from holding CaliberCos Class A or generate 25.0% return on investment over 90 days.

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

FS KKR Capital  vs.  CaliberCos Class A

FS KKR Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days FS KKR Capital has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

CaliberCos Class A

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CaliberCos Class A are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CaliberCos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FS KKR and CaliberCos

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

The idea behind FS KKR Capital and CaliberCos Class A 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.