Correlation Between IShares MSCI and KraneShares MSCI

Can any of the company-specific risk be diversified away by investing in both IShares MSCI and KraneShares MSCI 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 MSCI 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 MSCI All, you can compare the effects of market volatilities on IShares MSCI and KraneShares MSCI 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 MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and KraneShares MSCI.

Diversification Opportunities for IShares MSCI and KraneShares MSCI

0.92

Correlation Coefficient

IShares MSCI  KraneShares MSCI

Almost no diversification

The 3 months correlation between IShares and KraneShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI Hong and KraneShares MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI All 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 MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI All has no effect on the direction of IShares MSCI i.e., IShares MSCI and KraneShares MSCI go up and down completely randomly.

Pair Corralation between IShares MSCI and KraneShares MSCI

Considering the 90-day investment horizon IShares MSCI is expected to generate 1.05 times less return on investment than KraneShares MSCI. But when comparing it to its historical volatility, iShares MSCI Hong is 1.55 times less risky than KraneShares MSCI. It trades about 0.04 of its potential returns per unit of risk. KraneShares MSCI All is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,362  in KraneShares MSCI All on September 22, 2024 and sell it today you would earn a total of  81.00  from holding KraneShares MSCI All or generate 5.95% return on investment over 90 days.

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

iShares MSCI Hong  vs.  KraneShares MSCI All

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 newest stock price confusion, may contribute to short-horizon losses for the traders.

KraneShares MSCI All

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish basic indicators, KraneShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with IShares MSCI and KraneShares MSCI

The main advantage of trading using opposite IShares MSCI and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI position performs unexpectedly, KraneShares MSCI 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 MSCI will offset losses from the drop in KraneShares MSCI's long position.

The idea behind iShares MSCI Hong and KraneShares MSCI All 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.