Correlation Between Global X and KraneShares Emerging

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

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

Diversification Opportunities for Global X and KraneShares Emerging

-0.23

Correlation Coefficient

Global X  KraneShares Emerging

Very good diversification

The 3 months correlation between Global and KraneShares is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Global X Alternative and KraneShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Emerging and Global X 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 Global X Alternative are associated (or correlated) with KraneShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Emerging has no effect on the direction of Global X i.e., Global X and KraneShares Emerging go up and down completely randomly.

Pair Corralation between Global X and KraneShares Emerging

Given the investment horizon of 90 days Global X is expected to generate 1.1 times less return on investment than KraneShares Emerging. But when comparing it to its historical volatility, Global X Alternative is 2.88 times less risky than KraneShares Emerging. It trades about 0.07 of its potential returns per unit of risk. KraneShares Emerging Markets is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,459  in KraneShares Emerging Markets on September 20, 2024 and sell it today you would earn a total of  250.00  from holding KraneShares Emerging Markets or generate 17.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Global X Alternative  vs.  KraneShares Emerging Markets

Global X Alternative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Alternative has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KraneShares Emerging

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Emerging Markets are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, KraneShares Emerging is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Global X and KraneShares Emerging

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

The idea behind Global X Alternative and KraneShares Emerging Markets 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.