Correlation Between PHX Energy and KKR Co

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

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

Diversification Opportunities for PHX Energy and KKR Co

-0.17

Correlation Coefficient

PHX Energy  KKR Co

Good diversification

The 3 months correlation between PHX and KKR is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding PHX Energy Services and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP and PHX Energy 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 PHX Energy Services are associated (or correlated) with KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of PHX Energy i.e., PHX Energy and KKR Co go up and down completely randomly.

Pair Corralation between PHX Energy and KKR Co

Assuming the 90 days horizon PHX Energy is expected to generate 26.99 times less return on investment than KKR Co. In addition to that, PHX Energy is 1.07 times more volatile than KKR Co LP. It trades about 0.01 of its total potential returns per unit of risk. KKR Co LP is currently generating about 0.16 per unit of volatility. If you would invest  10,422  in KKR Co LP on September 27, 2024 and sell it today you would earn a total of  4,830  from holding KKR Co LP or generate 46.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

PHX Energy Services  vs.  KKR Co LP

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, PHX Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

KKR Co LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PHX Energy and KKR Co

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

The idea behind PHX Energy Services and KKR Co LP 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.