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 MSCI 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

0.01

Correlation Coefficient

Global X  KraneShares Emerging

Significant diversification

The 3 months correlation between Global and KraneShares is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Global X MSCI 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 MSCI 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 MSCI is expected to under-perform the KraneShares Emerging. But the etf apears to be less risky and, when comparing its historical volatility, Global X MSCI is 1.95 times less risky than KraneShares Emerging. The etf trades about -0.08 of its potential returns per unit of risk. The KraneShares Emerging Markets is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,745  in KraneShares Emerging Markets on September 19, 2024 and sell it today you would earn a total of  9.00  from holding KraneShares Emerging Markets or generate 0.52% return on investment over 90 days.

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

Global X MSCI  vs.  KraneShares Emerging Markets

Global X MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

KraneShares Emerging

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Emerging Markets are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain primary indicators, KraneShares Emerging may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 MSCI 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.