Correlation Between KraneShares MSCI and KraneShares MSCI

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

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

Diversification Opportunities for KraneShares MSCI and KraneShares MSCI

0.72

Correlation Coefficient

KraneShares MSCI  KraneShares MSCI

Poor diversification

The 3 months correlation between KraneShares and KraneShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI China and KraneShares MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI All and KraneShares MSCI 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 MSCI China are associated (or correlated) with KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI All has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and KraneShares MSCI go up and down completely randomly.

Pair Corralation between KraneShares MSCI and KraneShares MSCI

Given the investment horizon of 90 days KraneShares MSCI China is expected to under-perform the KraneShares MSCI. In addition to that, KraneShares MSCI is 1.52 times more volatile than KraneShares MSCI All. It trades about -0.06 of its total potential returns per unit of risk. KraneShares MSCI All is currently generating about 0.18 per unit of volatility. If you would invest  1,830  in KraneShares MSCI All on January 30, 2024 and sell it today you would earn a total of  65.00  from holding KraneShares MSCI All or generate 3.55% return on investment over 90 days.

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

KraneShares MSCI China  vs.  KraneShares MSCI All

KraneShares MSCI China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, KraneShares MSCI may actually be approaching a critical reversion point that can send shares even higher in May 2024.

KraneShares MSCI All

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile essential indicators, KraneShares MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KraneShares MSCI and KraneShares MSCI

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

The idea behind KraneShares MSCI China and KraneShares MSCI All 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.