Correlation Between IShares JP and KraneShares Asia

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

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

Diversification Opportunities for IShares JP and KraneShares Asia

-0.55

Correlation Coefficient

IShares JP  KraneShares Asia

Excellent diversification

The 3 months correlation between IShares and KraneShares is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares JP Morgan 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 IShares JP 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 iShares JP Morgan 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 IShares JP i.e., IShares JP and KraneShares Asia go up and down completely randomly.

Pair Corralation between IShares JP and KraneShares Asia

Considering the 90-day investment horizon iShares JP Morgan is expected to under-perform the KraneShares Asia. In addition to that, IShares JP is 1.38 times more volatile than KraneShares Asia Pacific. It trades about -0.06 of its total potential returns per unit of risk. KraneShares Asia Pacific is currently generating about 0.04 per unit of volatility. If you would invest  2,431  in KraneShares Asia Pacific on September 19, 2024 and sell it today you would earn a total of  16.00  from holding KraneShares Asia Pacific or generate 0.66% return on investment over 90 days.

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

iShares JP Morgan  vs.  KraneShares Asia Pacific

iShares JP Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares JP Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, IShares JP 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Asia Pacific are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 IShares JP and KraneShares Asia

The main advantage of trading using opposite IShares JP and KraneShares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares JP 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 iShares JP Morgan 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.