Correlation Between Golub Capital and FS KKR

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

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

Diversification Opportunities for Golub Capital and FS KKR

0.73

Correlation Coefficient

Golub Capital  FS KKR

Poor diversification

The 3 months correlation between Golub and FSK is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Golub Capital BDC and FS KKR Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS KKR Capital and Golub Capital 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 Golub Capital BDC are associated (or correlated) with FS KKR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS KKR Capital has no effect on the direction of Golub Capital i.e., Golub Capital and FS KKR go up and down completely randomly.

Pair Corralation between Golub Capital and FS KKR

Given the investment horizon of 90 days Golub Capital BDC is expected to generate 0.66 times more return on investment than FS KKR. However, Golub Capital BDC is 1.51 times less risky than FS KKR. It trades about 0.06 of its potential returns per unit of risk. FS KKR Capital is currently generating about 0.02 per unit of risk. If you would invest  1,487  in Golub Capital BDC on December 27, 2024 and sell it today you would earn a total of  45.00  from holding Golub Capital BDC or generate 3.03% return on investment over 90 days.

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

Golub Capital BDC  vs.  FS KKR Capital

Golub Capital BDC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Golub Capital BDC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Golub Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FS KKR Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Golub Capital and FS KKR

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

The idea behind Golub Capital BDC and FS KKR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.