Correlation Between Annaly Capital and KKR Real

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

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

Diversification Opportunities for Annaly Capital and KKR Real

0.43

Correlation Coefficient

Annaly Capital  KKR Real

Very weak diversification

The 3 months correlation between Annaly and KKR is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Annaly Capital Management and KKR Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Real Estate and Annaly 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 Annaly Capital Management are associated (or correlated) with KKR Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Real Estate has no effect on the direction of Annaly Capital i.e., Annaly Capital and KKR Real go up and down completely randomly.

Pair Corralation between Annaly Capital and KKR Real

Assuming the 90 days trading horizon Annaly Capital is expected to generate 190.55 times less return on investment than KKR Real. But when comparing it to its historical volatility, Annaly Capital Management is 10.57 times less risky than KKR Real. It trades about 0.02 of its potential returns per unit of risk. KKR Real Estate is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  911.00  in KKR Real Estate on May 4, 2024 and sell it today you would earn a total of  234.00  from holding KKR Real Estate or generate 25.69% return on investment over 90 days.

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

Annaly Capital Management  vs.  KKR Real Estate

Annaly Capital Management

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Annaly Capital Management are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Annaly Capital is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

KKR Real Estate

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Real Estate are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, KKR Real reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Annaly Capital and KKR Real

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

The idea behind Annaly Capital Management and KKR Real Estate 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.