Correlation Between KKR Co and Beazer Homes

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

By analyzing existing cross correlation between KKR Co LP and Beazer Homes USA, you can compare the effects of market volatilities on KKR Co and Beazer Homes 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 KKR Co with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of KKR Co and Beazer Homes.

Diversification Opportunities for KKR Co and Beazer Homes

0.69

Correlation Coefficient

KKR Co  Beazer Homes

Poor diversification

The 3 months correlation between KKR and Beazer is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and KKR Co 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 KKR Co LP are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of KKR Co i.e., KKR Co and Beazer Homes go up and down completely randomly.

Pair Corralation between KKR Co and Beazer Homes

Considering the 90-day investment horizon KKR Co LP is expected to generate 0.81 times more return on investment than Beazer Homes. However, KKR Co LP is 1.24 times less risky than Beazer Homes. It trades about -0.11 of its potential returns per unit of risk. Beazer Homes USA is currently generating about -0.1 per unit of risk. If you would invest  14,967  in KKR Co LP on December 27, 2024 and sell it today you would lose (3,023) from holding KKR Co LP or give up 20.2% of portfolio value over 90 days.

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

KKR Co LP  vs.  Beazer Homes USA

KKR Co LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days KKR Co LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Beazer Homes USA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beazer Homes USA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with KKR Co and Beazer Homes

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

The idea behind KKR Co LP and Beazer Homes USA 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.