Correlation Between Prospect Capital and FS KKR

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

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

Diversification Opportunities for Prospect Capital and FS KKR

-0.28

Correlation Coefficient

Prospect Capital  FS KKR

Very good diversification

The 3 months correlation between Prospect and FSK is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Prospect Capital 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 Prospect 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 Prospect Capital 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 Prospect Capital i.e., Prospect Capital and FS KKR go up and down completely randomly.

Pair Corralation between Prospect Capital and FS KKR

Given the investment horizon of 90 days Prospect Capital is expected to under-perform the FS KKR. In addition to that, Prospect Capital is 1.39 times more volatile than FS KKR Capital. It trades about -0.02 of its total potential returns per unit of risk. FS KKR Capital is currently generating about 0.21 per unit of volatility. If you would invest  1,950  in FS KKR Capital on April 25, 2025 and sell it today you would earn a total of  286.00  from holding FS KKR Capital or generate 14.67% return on investment over 90 days.

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

Prospect Capital  vs.  FS KKR Capital

Prospect Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prospect Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Prospect Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

FS KKR Capital

Risk-Adjusted Performance

Solid

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

Pair Trading with Prospect Capital and FS KKR

The main advantage of trading using opposite Prospect Capital and FS KKR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prospect Capital 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 Prospect Capital 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.