Correlation Between KraneShares Dynamic and Global X

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

By analyzing existing cross correlation between KraneShares Dynamic Emerging and Global X Funds, you can compare the effects of market volatilities on KraneShares Dynamic and Global X 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 KraneShares Dynamic with a short position of Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares Dynamic and Global X.

Diversification Opportunities for KraneShares Dynamic and Global X

0.85

Correlation Coefficient

KraneShares Dynamic  Global X

Very poor diversification

The 3 months correlation between KraneShares and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares Dynamic Emerging and Global X Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Funds and KraneShares Dynamic 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 KraneShares Dynamic Emerging are associated (or correlated) with Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Funds has no effect on the direction of KraneShares Dynamic i.e., KraneShares Dynamic and Global X go up and down completely randomly.

Pair Corralation between KraneShares Dynamic and Global X

Considering the 90-day investment horizon KraneShares Dynamic Emerging is expected to generate 1.15 times more return on investment than Global X. However, KraneShares Dynamic is 1.15 times more volatile than Global X Funds. It trades about 0.19 of its potential returns per unit of risk. Global X Funds is currently generating about 0.13 per unit of risk. If you would invest  2,426  in KraneShares Dynamic Emerging on February 19, 2024 and sell it today you would earn a total of  282.00  from holding KraneShares Dynamic Emerging or generate 11.62% return on investment over 90 days.

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

KraneShares Dynamic Emerging  vs.  Global X Funds

KraneShares Dynamic

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Dynamic Emerging are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, KraneShares Dynamic may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Global X Funds

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with KraneShares Dynamic and Global X

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

The idea behind KraneShares Dynamic Emerging and Global X Funds 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.