Correlation Between IShares China and KraneShares MSCI

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

Diversification Opportunities for IShares China and KraneShares MSCI

0.99

Correlation Coefficient

IShares China  KraneShares MSCI

No risk reduction

The 3 months correlation between IShares and KraneShares is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding iShares China Large Cap 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 China 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 China Large Cap 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 China i.e., IShares China and KraneShares MSCI go up and down completely randomly.

Pair Corralation between IShares China and KraneShares MSCI

Considering the 90-day investment horizon iShares China Large Cap is expected to generate 1.19 times more return on investment than KraneShares MSCI. However, IShares China is 1.19 times more volatile than KraneShares MSCI All. It trades about 0.16 of its potential returns per unit of risk. KraneShares MSCI All is currently generating about 0.11 per unit of risk. If you would invest  3,049  in iShares China Large Cap on December 30, 2024 and sell it today you would earn a total of  535.00  from holding iShares China Large Cap or generate 17.55% return on investment over 90 days.

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

iShares China Large Cap  vs.  KraneShares MSCI All

iShares China Large

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares China Large Cap are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, IShares China demonstrated solid returns over the last few months and may actually be approaching a breakup point.

KraneShares MSCI All

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, KraneShares MSCI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with IShares China and KraneShares MSCI

The main advantage of trading using opposite IShares China and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares China 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 China Large Cap 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.

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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.