Correlation Between Global X and KraneShares CSI

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

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

Diversification Opportunities for Global X and KraneShares CSI

0.99

Correlation Coefficient

Global X  KraneShares CSI

No risk reduction

The 3 months correlation between Global and KraneShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI and KraneShares CSI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares CSI China 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 MSCI are associated (or correlated) with KraneShares CSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares CSI China has no effect on the direction of Global X i.e., Global X and KraneShares CSI go up and down completely randomly.

Pair Corralation between Global X and KraneShares CSI

Given the investment horizon of 90 days Global X is expected to generate 1.02 times less return on investment than KraneShares CSI. But when comparing it to its historical volatility, Global X MSCI is 1.04 times less risky than KraneShares CSI. It trades about 0.12 of its potential returns per unit of risk. KraneShares CSI China is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,555  in KraneShares CSI China on September 14, 2024 and sell it today you would earn a total of  662.00  from holding KraneShares CSI China or generate 25.91% return on investment over 90 days.

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

Global X MSCI  vs.  KraneShares CSI China

Global X MSCI

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Global X reported solid returns over the last few months and may actually be approaching a breakup point.

KraneShares CSI China

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, KraneShares CSI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and KraneShares CSI

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

The idea behind Global X MSCI and KraneShares CSI China 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 Transaction History module to view history of all your transactions and understand their impact on performance.