Correlation Between FS KKR and GMO Internet

Can any of the company-specific risk be diversified away by investing in both FS KKR and GMO Internet 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 GMO Internet 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 GMO Internet, you can compare the effects of market volatilities on FS KKR and GMO Internet 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 GMO Internet. Check out your portfolio center. Please also check ongoing floating volatility patterns of FS KKR and GMO Internet.

Diversification Opportunities for FS KKR and GMO Internet

0.14

Correlation Coefficient

FS KKR  GMO Internet

Average diversification

The 3 months correlation between FSK and GMO is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding FS KKR Capital and GMO Internet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMO Internet 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 GMO Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMO Internet has no effect on the direction of FS KKR i.e., FS KKR and GMO Internet go up and down completely randomly.

Pair Corralation between FS KKR and GMO Internet

Considering the 90-day investment horizon FS KKR Capital is expected to generate 0.47 times more return on investment than GMO Internet. However, FS KKR Capital is 2.13 times less risky than GMO Internet. It trades about -0.02 of its potential returns per unit of risk. GMO Internet is currently generating about -0.16 per unit of risk. If you would invest  2,145  in FS KKR Capital on October 11, 2024 and sell it today you would lose (7.00) from holding FS KKR Capital or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

FS KKR Capital  vs.  GMO Internet

FS KKR Capital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, FS KKR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

GMO Internet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMO Internet has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GMO Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FS KKR and GMO Internet

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

The idea behind FS KKR Capital and GMO Internet 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.