Correlation Between KraneShares Global and Tokyo Electric

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

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

Diversification Opportunities for KraneShares Global and Tokyo Electric

0.7

Correlation Coefficient

KraneShares Global  Tokyo Electric

Poor diversification

The 3 months correlation between KraneShares and Tokyo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares Global Carbon and Tokyo Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Electric Power and KraneShares Global 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 Global Carbon are associated (or correlated) with Tokyo Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Electric Power has no effect on the direction of KraneShares Global i.e., KraneShares Global and Tokyo Electric go up and down completely randomly.

Pair Corralation between KraneShares Global and Tokyo Electric

Given the investment horizon of 90 days KraneShares Global Carbon is expected to generate 0.92 times more return on investment than Tokyo Electric. However, KraneShares Global Carbon is 1.09 times less risky than Tokyo Electric. It trades about 0.03 of its potential returns per unit of risk. Tokyo Electric Power is currently generating about 0.01 per unit of risk. If you would invest  3,151  in KraneShares Global Carbon on January 25, 2024 and sell it today you would earn a total of  29.00  from holding KraneShares Global Carbon or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

KraneShares Global Carbon  vs.  Tokyo Electric Power

KraneShares Global Carbon

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Global Carbon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, KraneShares Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Tokyo Electric Power

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Electric Power are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Tokyo Electric showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KraneShares Global and Tokyo Electric

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

The idea behind KraneShares Global Carbon and Tokyo Electric Power 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.