Correlation Between GMO Internet and FS KKR

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

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

Diversification Opportunities for GMO Internet and FS KKR

0.03

Correlation Coefficient

GMO Internet  FS KKR

Significant diversification

The 3 months correlation between GMO and FSK is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet 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 GMO Internet 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 GMO Internet 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 GMO Internet i.e., GMO Internet and FS KKR go up and down completely randomly.

Pair Corralation between GMO Internet and FS KKR

Assuming the 90 days horizon GMO Internet is expected to generate 1.04 times less return on investment than FS KKR. But when comparing it to its historical volatility, GMO Internet is 1.28 times less risky than FS KKR. It trades about 0.29 of its potential returns per unit of risk. FS KKR Capital is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2,174  in FS KKR Capital on October 26, 2024 and sell it today you would earn a total of  78.00  from holding FS KKR Capital or generate 3.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

GMO Internet  vs.  FS KKR Capital

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.

FS KKR Capital

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 19 (%) 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.

Pair Trading with GMO Internet and FS KKR

The main advantage of trading using opposite GMO Internet and FS KKR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet 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 GMO Internet 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..