Correlation Between IShares MSCI and KraneShares

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

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

Diversification Opportunities for IShares MSCI and KraneShares

0.61

Correlation Coefficient

IShares MSCI  KraneShares

Poor diversification

The 3 months correlation between IShares and KraneShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Hong and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares and IShares MSCI 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 MSCI Hong 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 IShares MSCI i.e., IShares MSCI and KraneShares go up and down completely randomly.

Pair Corralation between IShares MSCI and KraneShares

Considering the 90-day investment horizon iShares MSCI Hong is expected to generate 0.8 times more return on investment than KraneShares. However, iShares MSCI Hong is 1.25 times less risky than KraneShares. It trades about 0.02 of its potential returns per unit of risk. KraneShares is currently generating about 0.01 per unit of risk. If you would invest  1,624  in iShares MSCI Hong on September 25, 2024 and sell it today you would earn a total of  70.00  from holding iShares MSCI Hong or generate 4.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	75.0%
Values	Daily Returns

iShares MSCI Hong  vs.  KraneShares

iShares MSCI Hong

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI Hong has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The new stock price confusion, may contribute to short-horizon losses for the traders.

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 new stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares MSCI and KraneShares

The main advantage of trading using opposite IShares MSCI and KraneShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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 iShares MSCI Hong 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 Commodity Directory module to find actively traded commodities issued by global exchanges.