Correlation Between KKR Real and Granite Point

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

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

Diversification Opportunities for KKR Real and Granite Point

-0.62

Correlation Coefficient

KKR Real  Granite Point

Excellent diversification

The 3 months correlation between KKR and Granite is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding KKR Real Estate and Granite Point Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Granite Point Mortgage and KKR Real 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 Real Estate are associated (or correlated) with Granite Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Granite Point Mortgage has no effect on the direction of KKR Real i.e., KKR Real and Granite Point go up and down completely randomly.

Pair Corralation between KKR Real and Granite Point

Assuming the 90 days trading horizon KKR Real Estate is expected to generate 1.37 times more return on investment than Granite Point. However, KKR Real is 1.37 times more volatile than Granite Point Mortgage. It trades about 0.04 of its potential returns per unit of risk. Granite Point Mortgage is currently generating about 0.04 per unit of risk. If you would invest  1,590  in KKR Real Estate on October 5, 2024 and sell it today you would earn a total of  364.00  from holding KKR Real Estate or generate 22.89% return on investment over 90 days.

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

KKR Real Estate  vs.  Granite Point Mortgage

KKR Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKR Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KKR Real is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Granite Point Mortgage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Point Mortgage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Granite Point may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KKR Real and Granite Point

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

The idea behind KKR Real Estate and Granite Point Mortgage 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.