Correlation Between Oaktree Specialty and FS KKR

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

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

Diversification Opportunities for Oaktree Specialty and FS KKR

-0.43

Correlation Coefficient

Oaktree Specialty  FS KKR

Very good diversification

The 3 months correlation between Oaktree and FSK is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Oaktree Specialty Lending and FS KKR Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS KKR Capital and Oaktree Specialty 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 Oaktree Specialty Lending are associated (or correlated) with FS KKR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS KKR Capital has no effect on the direction of Oaktree Specialty i.e., Oaktree Specialty and FS KKR go up and down completely randomly.

Pair Corralation between Oaktree Specialty and FS KKR

Given the investment horizon of 90 days Oaktree Specialty Lending is expected to under-perform the FS KKR. In addition to that, Oaktree Specialty is 1.13 times more volatile than FS KKR Capital. It trades about -0.21 of its total potential returns per unit of risk. FS KKR Capital is currently generating about 0.2 per unit of volatility. If you would invest  2,144  in FS KKR Capital on October 8, 2024 and sell it today you would earn a total of  56.00  from holding FS KKR Capital or generate 2.61% return on investment over 90 days.

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

Oaktree Specialty Lending  vs.  FS KKR Capital

Oaktree Specialty Lending

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oaktree Specialty Lending has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Oaktree Specialty is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

FS KKR Capital

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, FS KKR may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Oaktree Specialty and FS KKR

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

The idea behind Oaktree Specialty Lending and FS KKR Capital 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.