Correlation Between TPG and KKR Co

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

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

Diversification Opportunities for TPG and KKR Co

0.97

Correlation Coefficient

TPG  KKR Co

Almost no diversification

The 3 months correlation between TPG and KKR is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding TPG Inc 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 TPG 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 TPG Inc 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 TPG i.e., TPG and KKR Co go up and down completely randomly.

Pair Corralation between TPG and KKR Co

Considering the 90-day investment horizon TPG Inc is expected to generate 0.85 times more return on investment than KKR Co. However, TPG Inc is 1.17 times less risky than KKR Co. It trades about -0.12 of its potential returns per unit of risk. KKR Co LP is currently generating about -0.11 per unit of risk. If you would invest  6,442  in TPG Inc on December 26, 2024 and sell it today you would lose (1,187) from holding TPG Inc or give up 18.43% of portfolio value over 90 days.

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

TPG Inc  vs.  KKR Co LP

TPG Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days TPG Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KKR Co LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days KKR Co LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with TPG and KKR Co

The main advantage of trading using opposite TPG and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TPG 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 TPG Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.