Correlation Between Vanguard Total and KraneShares Asia

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

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

Diversification Opportunities for Vanguard Total and KraneShares Asia

-0.02

Correlation Coefficient

Vanguard Total  KraneShares Asia

Good diversification

The 3 months correlation between Vanguard and KraneShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Total International and KraneShares Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Asia Pacific and Vanguard Total 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 Vanguard Total International are associated (or correlated) with KraneShares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Asia Pacific has no effect on the direction of Vanguard Total i.e., Vanguard Total and KraneShares Asia go up and down completely randomly.

Pair Corralation between Vanguard Total and KraneShares Asia

Given the investment horizon of 90 days Vanguard Total International is expected to generate 0.46 times more return on investment than KraneShares Asia. However, Vanguard Total International is 2.17 times less risky than KraneShares Asia. It trades about 0.09 of its potential returns per unit of risk. KraneShares Asia Pacific is currently generating about -0.31 per unit of risk. If you would invest  4,994  in Vanguard Total International on September 23, 2024 and sell it today you would earn a total of  21.00  from holding Vanguard Total International or generate 0.42% return on investment over 90 days.

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

Vanguard Total International  vs.  KraneShares Asia Pacific

Vanguard Total Inter

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Vanguard Total is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KraneShares Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Asia Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KraneShares Asia is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Total and KraneShares Asia

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

The idea behind Vanguard Total International and KraneShares Asia Pacific 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.