Correlation Between CHIX and KraneShares

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

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

Diversification Opportunities for CHIX and KraneShares

0.83

Correlation Coefficient

CHIX  KraneShares

Very poor diversification

The 3 months correlation between CHIX and KraneShares is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding CHIX and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares and CHIX 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 CHIX are associated (or correlated) with KraneShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares has no effect on the direction of CHIX i.e., CHIX and KraneShares go up and down completely randomly.

Pair Corralation between CHIX and KraneShares

Given the investment horizon of 90 days CHIX is expected to under-perform the KraneShares. But the etf apears to be less risky and, when comparing its historical volatility, CHIX is 1.07 times less risky than KraneShares. The etf trades about -0.04 of its potential returns per unit of risk. The KraneShares is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,539  in KraneShares on September 19, 2024 and sell it today you would lose (99.00) from holding KraneShares or give up 6.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	32.65%
Values	Daily Returns

CHIX  vs.  KraneShares

CHIX

Risk-Adjusted Performance

0 of 100

Very Weak

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

KraneShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, KraneShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CHIX and KraneShares

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

The idea behind CHIX and KraneShares 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.