Correlation Between Capital Southwest and FS KKR

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

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

Diversification Opportunities for Capital Southwest and FS KKR

0.63

Correlation Coefficient

Capital Southwest  FS KKR

Poor diversification

The 3 months correlation between Capital and FSK is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Capital Southwest and FS KKR Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS KKR Capital and Capital Southwest 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 Capital Southwest are associated (or correlated) with FS KKR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS KKR Capital has no effect on the direction of Capital Southwest i.e., Capital Southwest and FS KKR go up and down completely randomly.

Pair Corralation between Capital Southwest and FS KKR

Given the investment horizon of 90 days Capital Southwest is expected to generate 0.68 times more return on investment than FS KKR. However, Capital Southwest is 1.47 times less risky than FS KKR. It trades about 0.22 of its potential returns per unit of risk. FS KKR Capital is currently generating about -0.11 per unit of risk. If you would invest  2,002  in Capital Southwest on May 11, 2025 and sell it today you would earn a total of  288.00  from holding Capital Southwest or generate 14.39% return on investment over 90 days.

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

Capital Southwest  vs.  FS KKR Capital

Capital Southwest

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Southwest are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Capital Southwest exhibited solid returns over the last few months and may actually be approaching a breakup point.

FS KKR Capital

Risk-Adjusted Performance

Weakest

Over the last 90 days FS KKR Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Capital Southwest and FS KKR

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

The idea behind Capital Southwest and FS KKR Capital 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.