Correlation Between KINDER and FS KKR

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

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

Diversification Opportunities for KINDER and FS KKR

0.35

Correlation Coefficient

KINDER  FS KKR

Weak diversification

The 3 months correlation between KINDER and FSK is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY 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 KINDER 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 KINDER MORGAN ENERGY 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 KINDER i.e., KINDER and FS KKR go up and down completely randomly.

Pair Corralation between KINDER and FS KKR

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to under-perform the FS KKR. But the bond apears to be less risky and, when comparing its historical volatility, KINDER MORGAN ENERGY is 1.16 times less risky than FS KKR. The bond trades about -0.06 of its potential returns per unit of risk. The FS KKR Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,075  in FS KKR Capital on December 22, 2024 and sell it today you would lose (1.00) from holding FS KKR Capital or give up 0.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	83.33%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  FS KKR Capital

KINDER MORGAN ENERGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FS KKR Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days FS KKR Capital has generated negative risk-adjusted returns adding no value to investors with long positions. 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 KINDER and FS KKR

The main advantage of trading using opposite KINDER and FS KKR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KINDER 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 KINDER MORGAN ENERGY 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..