Correlation Between Kamino and CLO

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

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

Diversification Opportunities for Kamino and CLO

-0.04

Correlation Coefficient

Kamino  CLO

Good diversification

The 3 months correlation between Kamino and CLO is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Kamino and CLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CLO and Kamino 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 Kamino are associated (or correlated) with CLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CLO has no effect on the direction of Kamino i.e., Kamino and CLO go up and down completely randomly.

Pair Corralation between Kamino and CLO

Assuming the 90 days trading horizon Kamino is expected to generate 3.25 times less return on investment than CLO. But when comparing it to its historical volatility, Kamino is 1.44 times less risky than CLO. It trades about 0.13 of its potential returns per unit of risk. CLO is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  0.07  in CLO on August 30, 2024 and sell it today you would lose (0.07) from holding CLO or give up 91.76% of portfolio value over 90 days.

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

Kamino  vs.  CLO

Kamino

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamino are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Kamino exhibited solid returns over the last few months and may actually be approaching a breakup point.

CLO

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CLO are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CLO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kamino and CLO

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

The idea behind Kamino and CLO 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..