Correlation Between FS KKR and BlackRock TCP

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

Diversification Opportunities for FS KKR and BlackRock TCP

0.72

Correlation Coefficient

FS KKR  BlackRock TCP

Poor diversification

The 3 months correlation between FSK and BlackRock is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding FS KKR Capital and BlackRock TCP Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock TCP Capital 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 BlackRock TCP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock TCP Capital has no effect on the direction of FS KKR i.e., FS KKR and BlackRock TCP go up and down completely randomly.

Pair Corralation between FS KKR and BlackRock TCP

Considering the 90-day investment horizon FS KKR Capital is expected to generate 0.7 times more return on investment than BlackRock TCP. However, FS KKR Capital is 1.43 times less risky than BlackRock TCP. It trades about 0.01 of its potential returns per unit of risk. BlackRock TCP Capital is currently generating about -0.03 per unit of risk. If you would invest  2,099  in FS KKR Capital on December 28, 2024 and sell it today you would earn a total of  0.00  from holding FS KKR Capital or generate 0.0% 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.  BlackRock TCP Capital

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.

BlackRock TCP Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlackRock TCP Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BlackRock TCP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with FS KKR and BlackRock TCP

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

The idea behind FS KKR Capital and BlackRock TCP Capital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.