Correlation Between KKR Real and Ladder Capital

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

Diversification Opportunities for KKR Real and Ladder Capital

0.89

Correlation Coefficient

KKR Real  Ladder Capital

Very poor diversification

The 3 months correlation between KKR and Ladder is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding KKR Real Estate and Ladder Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ladder Capital Corp 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 Ladder Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ladder Capital Corp has no effect on the direction of KKR Real i.e., KKR Real and Ladder Capital go up and down completely randomly.

Pair Corralation between KKR Real and Ladder Capital

Given the investment horizon of 90 days KKR Real Estate is expected to generate 1.92 times more return on investment than Ladder Capital. However, KKR Real is 1.92 times more volatile than Ladder Capital Corp. It trades about 0.21 of its potential returns per unit of risk. Ladder Capital Corp is currently generating about 0.2 per unit of risk. If you would invest  1,004  in KKR Real Estate on December 1, 2024 and sell it today you would earn a total of  105.00  from holding KKR Real Estate or generate 10.46% return on investment over 90 days.

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

KKR Real Estate  vs.  Ladder Capital Corp

KKR Real Estate

Risk-Adjusted Performance

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 nearly stable technical and fundamental indicators, KKR Real is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ladder Capital Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ladder Capital Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Ladder Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KKR Real and Ladder Capital

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

The idea behind KKR Real Estate and Ladder Capital Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..