Correlation Between FS KKR and Oaktree Specialty

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

Diversification Opportunities for FS KKR and Oaktree Specialty

0.63

Correlation Coefficient

FS KKR  Oaktree Specialty

Poor diversification

The 3 months correlation between FSK and Oaktree is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding FS KKR Capital and Oaktree Specialty Lending in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Specialty Lending 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 Oaktree Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Specialty Lending has no effect on the direction of FS KKR i.e., FS KKR and Oaktree Specialty go up and down completely randomly.

Pair Corralation between FS KKR and Oaktree Specialty

Considering the 90-day investment horizon FS KKR is expected to generate 11.26 times less return on investment than Oaktree Specialty. In addition to that, FS KKR is 1.35 times more volatile than Oaktree Specialty Lending. It trades about 0.01 of its total potential returns per unit of risk. Oaktree Specialty Lending is currently generating about 0.12 per unit of volatility. If you would invest  1,473  in Oaktree Specialty Lending on December 19, 2024 and sell it today you would earn a total of  102.00  from holding Oaktree Specialty Lending or generate 6.92% return on investment over 90 days.

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

FS KKR Capital  vs.  Oaktree Specialty Lending

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.

Oaktree Specialty Lending

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Oaktree Specialty Lending are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Oaktree Specialty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with FS KKR and Oaktree Specialty

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

The idea behind FS KKR Capital and Oaktree Specialty Lending 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.