Correlation Between FlexShares STOXX and KraneShares

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

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

Diversification Opportunities for FlexShares STOXX and KraneShares

-0.36

Correlation Coefficient

FlexShares STOXX  KraneShares

Very good diversification

The 3 months correlation between FlexShares and KraneShares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding FlexShares STOXX ESG and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares and FlexShares STOXX 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 FlexShares STOXX ESG 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 FlexShares STOXX i.e., FlexShares STOXX and KraneShares go up and down completely randomly.

Pair Corralation between FlexShares STOXX and KraneShares

Considering the 90-day investment horizon FlexShares STOXX ESG is expected to generate 0.48 times more return on investment than KraneShares. However, FlexShares STOXX ESG is 2.09 times less risky than KraneShares. It trades about 0.11 of its potential returns per unit of risk. KraneShares is currently generating about -0.04 per unit of risk. If you would invest  9,696  in FlexShares STOXX ESG on October 26, 2024 and sell it today you would earn a total of  4,608  from holding FlexShares STOXX ESG or generate 47.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	23.68%
Values	Daily Returns

FlexShares STOXX ESG  vs.  KraneShares

FlexShares STOXX ESG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FlexShares STOXX ESG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, FlexShares STOXX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 FlexShares STOXX and KraneShares

The main advantage of trading using opposite FlexShares STOXX and KraneShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FlexShares STOXX 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 FlexShares STOXX ESG 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.