Correlation Between Trinity Capital and FS KKR

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

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

Diversification Opportunities for Trinity Capital and FS KKR

0.36

Correlation Coefficient

Trinity Capital  FS KKR

Weak diversification

The 3 months correlation between Trinity and FSK is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Trinity Capital 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 Trinity Capital 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 Trinity Capital 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 Trinity Capital i.e., Trinity Capital and FS KKR go up and down completely randomly.

Pair Corralation between Trinity Capital and FS KKR

Given the investment horizon of 90 days Trinity Capital is expected to generate 0.99 times more return on investment than FS KKR. However, Trinity Capital is 1.01 times less risky than FS KKR. It trades about 0.16 of its potential returns per unit of risk. FS KKR Capital is currently generating about 0.01 per unit of risk. If you would invest  1,428  in Trinity Capital on December 27, 2024 and sell it today you would earn a total of  178.00  from holding Trinity Capital or generate 12.46% return on investment over 90 days.

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

Trinity Capital  vs.  FS KKR Capital

Trinity Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trinity Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Trinity Capital displayed solid returns over the last few months and may actually be approaching a breakup point.

FS KKR Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FS KKR Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, FS KKR is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Trinity Capital and FS KKR

The main advantage of trading using opposite Trinity Capital and FS KKR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trinity Capital 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 Trinity Capital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.