Correlation Between SPDR Bloomberg and KraneShares Asia

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

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

Diversification Opportunities for SPDR Bloomberg and KraneShares Asia

-0.68

Correlation Coefficient

SPDR Bloomberg  KraneShares Asia

Excellent diversification

The 3 months correlation between SPDR and KraneShares is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Bloomberg Barclays 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 SPDR Bloomberg 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 SPDR Bloomberg Barclays 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 SPDR Bloomberg i.e., SPDR Bloomberg and KraneShares Asia go up and down completely randomly.

Pair Corralation between SPDR Bloomberg and KraneShares Asia

Given the investment horizon of 90 days SPDR Bloomberg Barclays is expected to generate 0.86 times more return on investment than KraneShares Asia. However, SPDR Bloomberg Barclays is 1.16 times less risky than KraneShares Asia. It trades about 0.18 of its potential returns per unit of risk. KraneShares Asia Pacific is currently generating about -0.15 per unit of risk. If you would invest  2,400  in SPDR Bloomberg Barclays on September 19, 2024 and sell it today you would earn a total of  31.00  from holding SPDR Bloomberg Barclays or generate 1.29% return on investment over 90 days.

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

SPDR Bloomberg Barclays  vs.  KraneShares Asia Pacific

SPDR Bloomberg Barclays

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR Bloomberg Barclays has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, SPDR Bloomberg is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KraneShares Asia Pacific

Risk-Adjusted Performance

3 of 100

Solid

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 SPDR Bloomberg and KraneShares Asia

The main advantage of trading using opposite SPDR Bloomberg and KraneShares Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR Bloomberg 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 SPDR Bloomberg Barclays 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.