Correlation Between Great Ajax and KKR Co

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

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

Diversification Opportunities for Great Ajax and KKR Co

-0.46

Correlation Coefficient

Great Ajax  KKR Co

Very good diversification

The 3 months correlation between Great and KKR is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Great Ajax Corp 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 Great Ajax 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 Great Ajax Corp 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 Great Ajax i.e., Great Ajax and KKR Co go up and down completely randomly.

Pair Corralation between Great Ajax and KKR Co

Considering the 90-day investment horizon Great Ajax Corp is expected to under-perform the KKR Co. In addition to that, Great Ajax is 1.82 times more volatile than KKR Co LP. It trades about -0.22 of its total potential returns per unit of risk. KKR Co LP is currently generating about 0.25 per unit of volatility. If you would invest  12,654  in KKR Co LP on July 18, 2024 and sell it today you would earn a total of  924.00  from holding KKR Co LP or generate 7.3% return on investment over 90 days.

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

Great Ajax Corp  vs.  KKR Co LP

Great Ajax Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Ajax Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KKR Co LP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Ajax and KKR Co

The main advantage of trading using opposite Great Ajax and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Ajax 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 Great Ajax Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.