Correlation Between Ares Management and KKR Co

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

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

Diversification Opportunities for Ares Management and KKR Co

0.95

Correlation Coefficient

Ares Management  KKR Co

Almost no diversification

The 3 months correlation between Ares and KKR is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Ares Management LP 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 Ares Management 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 Ares Management LP 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 Ares Management i.e., Ares Management and KKR Co go up and down completely randomly.

Pair Corralation between Ares Management and KKR Co

Given the investment horizon of 90 days Ares Management is expected to generate 1.63 times less return on investment than KKR Co. But when comparing it to its historical volatility, Ares Management LP is 1.2 times less risky than KKR Co. It trades about 0.14 of its potential returns per unit of risk. KKR Co LP is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  11,461  in KKR Co LP on May 4, 2025 and sell it today you would earn a total of  2,794  from holding KKR Co LP or generate 24.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Ares Management LP  vs.  KKR Co LP

Ares Management LP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ares Management LP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Ares Management unveiled solid returns over the last few months and may actually be approaching a breakup point.

KKR Co LP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 14 (%) 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 Ares Management and KKR Co

The main advantage of trading using opposite Ares Management and KKR Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ares Management 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 Ares Management LP 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.