Correlation Between KraneShares CSI and Invesco Golden

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Can any of the company-specific risk be diversified away by investing in both KraneShares CSI and Invesco Golden 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 CSI and Invesco Golden into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KraneShares CSI China and Invesco Golden Dragon, you can compare the effects of market volatilities on KraneShares CSI and Invesco Golden 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 CSI with a short position of Invesco Golden. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares CSI and Invesco Golden.

Diversification Opportunities for KraneShares CSI and Invesco Golden

0.85
  Correlation Coefficient

Very poor diversification

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

Pair Corralation between KraneShares CSI and Invesco Golden

Given the investment horizon of 90 days KraneShares CSI China is expected to generate 0.97 times more return on investment than Invesco Golden. However, KraneShares CSI China is 1.03 times less risky than Invesco Golden. It trades about -0.19 of its potential returns per unit of risk. Invesco Golden Dragon is currently generating about -0.25 per unit of risk. If you would invest  2,704  in KraneShares CSI China on January 20, 2024 and sell it today you would lose (153.00) from holding KraneShares CSI China or give up 5.66% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

KraneShares CSI China  vs.  Invesco Golden Dragon

 Performance 
       Timeline  
KraneShares CSI China 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, KraneShares CSI may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Invesco Golden Dragon 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Golden Dragon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Invesco Golden may actually be approaching a critical reversion point that can send shares even higher in May 2024.

KraneShares CSI and Invesco Golden Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with KraneShares CSI and Invesco Golden

The main advantage of trading using opposite KraneShares CSI and Invesco Golden positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KraneShares CSI position performs unexpectedly, Invesco Golden 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 Invesco Golden will offset losses from the drop in Invesco Golden's long position.
The idea behind KraneShares CSI China and Invesco Golden Dragon 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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