Correlation Between KKR Co and Bank of New York

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

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

Diversification Opportunities for KKR Co and Bank of New York

0.32

Correlation Coefficient

KKR Co  Bank of New York

Weak diversification

The 3 months correlation between KKR and Bank is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Bank of New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of New York and KKR Co 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 KKR Co LP are associated (or correlated) with Bank of New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of New York has no effect on the direction of KKR Co i.e., KKR Co and Bank of New York go up and down completely randomly.

Pair Corralation between KKR Co and Bank of New York

Considering the 90-day investment horizon KKR Co LP is expected to under-perform the Bank of New York. In addition to that, KKR Co is 1.62 times more volatile than Bank of New. It trades about -0.15 of its total potential returns per unit of risk. Bank of New is currently generating about 0.05 per unit of volatility. If you would invest  5,633  in Bank of New on February 5, 2024 and sell it today you would earn a total of  67.00  from holding Bank of New or generate 1.19% return on investment over 90 days.

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

KKR Co LP  vs.  Bank of New

KKR Co LP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Bank of New York

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of New are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Bank of New York is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KKR Co and Bank of New York

The main advantage of trading using opposite KKR Co and Bank of New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KKR Co position performs unexpectedly, Bank of New York 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 Bank of New York will offset losses from the drop in Bank of New York's long position.

The idea behind KKR Co LP and Bank of New 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.