Correlation Between Xtrackers Harvest and KraneShares CSI

Can any of the company-specific risk be diversified away by investing in both Xtrackers Harvest and KraneShares CSI 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 Xtrackers Harvest and KraneShares CSI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers Harvest CSI and KraneShares CSI China, you can compare the effects of market volatilities on Xtrackers Harvest and KraneShares CSI 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 Xtrackers Harvest with a short position of KraneShares CSI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers Harvest and KraneShares CSI.

Diversification Opportunities for Xtrackers Harvest and KraneShares CSI

0.77

Correlation Coefficient

Xtrackers Harvest  KraneShares CSI

Poor diversification

The 3 months correlation between Xtrackers and KraneShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers Harvest CSI and KraneShares CSI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares CSI China and Xtrackers Harvest 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 Xtrackers Harvest CSI are associated (or correlated) with KraneShares CSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares CSI China has no effect on the direction of Xtrackers Harvest i.e., Xtrackers Harvest and KraneShares CSI go up and down completely randomly.

Pair Corralation between Xtrackers Harvest and KraneShares CSI

Given the investment horizon of 90 days Xtrackers Harvest is expected to generate 3.1 times less return on investment than KraneShares CSI. But when comparing it to its historical volatility, Xtrackers Harvest CSI is 1.98 times less risky than KraneShares CSI. It trades about 0.13 of its potential returns per unit of risk. KraneShares CSI China is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  2,497  in KraneShares CSI China on February 19, 2024 and sell it today you would earn a total of  729.00  from holding KraneShares CSI China or generate 29.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Xtrackers Harvest CSI  vs.  KraneShares CSI China

Xtrackers Harvest CSI

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Xtrackers Harvest may actually be approaching a critical reversion point that can send shares even higher in June 2024.

KraneShares CSI China

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, KraneShares CSI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xtrackers Harvest and KraneShares CSI

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

The idea behind Xtrackers Harvest CSI and KraneShares CSI China 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..