Correlation Between Lument Finance and KKR Real

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

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

Diversification Opportunities for Lument Finance and KKR Real

0.88

Correlation Coefficient

Lument Finance  KKR Real

Very poor diversification

The 3 months correlation between Lument and KKR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lument Finance Trust and KKR Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Real Estate and Lument Finance 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 Lument Finance Trust are associated (or correlated) with KKR Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Real Estate has no effect on the direction of Lument Finance i.e., Lument Finance and KKR Real go up and down completely randomly.

Pair Corralation between Lument Finance and KKR Real

Considering the 90-day investment horizon Lument Finance is expected to generate 1.64 times less return on investment than KKR Real. But when comparing it to its historical volatility, Lument Finance Trust is 1.23 times less risky than KKR Real. It trades about 0.08 of its potential returns per unit of risk. KKR Real Estate is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,003  in KKR Real Estate on December 27, 2024 and sell it today you would earn a total of  118.00  from holding KKR Real Estate or generate 11.76% return on investment over 90 days.

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

Lument Finance Trust  vs.  KKR Real Estate

Lument Finance Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lument Finance Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Lument Finance may actually be approaching a critical reversion point that can send shares even higher in April 2025.

KKR Real Estate

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Real Estate are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, KKR Real reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lument Finance and KKR Real

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

The idea behind Lument Finance Trust and KKR Real Estate 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.