Correlation Between KKR Co and Continental Aktiengesellscha

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

Diversification Opportunities for KKR Co and Continental Aktiengesellscha

0.38

Correlation Coefficient

KKR Co  Continental Aktiengesellscha

Weak diversification

The 3 months correlation between KKR and Continental is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Continental Aktiengesellschaft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Continental Aktiengesellscha 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 Continental Aktiengesellscha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Continental Aktiengesellscha has no effect on the direction of KKR Co i.e., KKR Co and Continental Aktiengesellscha go up and down completely randomly.

Pair Corralation between KKR Co and Continental Aktiengesellscha

Considering the 90-day investment horizon KKR Co LP is expected to under-perform the Continental Aktiengesellscha. But the stock apears to be less risky and, when comparing its historical volatility, KKR Co LP is 1.53 times less risky than Continental Aktiengesellscha. The stock trades about -0.13 of its potential returns per unit of risk. The Continental Aktiengesellschaft is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,456  in Continental Aktiengesellschaft on October 1, 2024 and sell it today you would earn a total of  401.00  from holding Continental Aktiengesellschaft or generate 6.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

KKR Co LP  vs.  Continental Aktiengesellschaft

KKR Co LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Continental Aktiengesellscha

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Continental Aktiengesellschaft are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Continental Aktiengesellscha may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with KKR Co and Continental Aktiengesellscha

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

The idea behind KKR Co LP and Continental Aktiengesellschaft 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.