Correlation Between Yokohama Rubber and KKR Co

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

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

Diversification Opportunities for Yokohama Rubber and KKR Co

-0.53

Correlation Coefficient

Yokohama Rubber  KKR Co

Excellent diversification

The 3 months correlation between Yokohama and KKR is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding The Yokohama Rubber 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 Yokohama Rubber 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 The Yokohama Rubber 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 Yokohama Rubber i.e., Yokohama Rubber and KKR Co go up and down completely randomly.

Pair Corralation between Yokohama Rubber and KKR Co

Assuming the 90 days trading horizon Yokohama Rubber is expected to generate 13.4 times less return on investment than KKR Co. In addition to that, Yokohama Rubber is 1.0 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 0.15 per unit of volatility. If you would invest  5,416  in KKR Co LP on September 12, 2024 and sell it today you would earn a total of  9,052  from holding KKR Co LP or generate 167.13% return on investment over 90 days.

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

The Yokohama Rubber  vs.  KKR Co LP

Yokohama Rubber

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Yokohama Rubber has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Yokohama Rubber is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

KKR Co LP

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 18 (%) 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 Yokohama Rubber and KKR Co

The main advantage of trading using opposite Yokohama Rubber and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yokohama Rubber 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 The Yokohama Rubber 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.