Correlation Between SUMITOMO P and KKR Co

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

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

Diversification Opportunities for SUMITOMO P and KKR Co

-0.44

Correlation Coefficient

SUMITOMO P  KKR Co

Very good diversification

The 3 months correlation between SUMITOMO and KKR is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding SUMITOMO P SP 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 SUMITOMO P 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 SUMITOMO P SP 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 SUMITOMO P i.e., SUMITOMO P and KKR Co go up and down completely randomly.

Pair Corralation between SUMITOMO P and KKR Co

Assuming the 90 days trading horizon SUMITOMO P SP is expected to under-perform the KKR Co. But the stock apears to be less risky and, when comparing its historical volatility, SUMITOMO P SP is 1.34 times less risky than KKR Co. The stock trades about -0.05 of its potential returns per unit of risk. The KKR Co LP is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  10,901  in KKR Co LP on September 3, 2024 and sell it today you would earn a total of  4,397  from holding KKR Co LP or generate 40.34% return on investment over 90 days.

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

SUMITOMO P SP  vs.  KKR Co LP

SUMITOMO P SP

Risk-Adjusted Performance

0 of 100

Very Weak

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

KKR Co LP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SUMITOMO P and KKR Co

The main advantage of trading using opposite SUMITOMO P and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SUMITOMO P 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 SUMITOMO P SP 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.

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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.