Correlation Between Invesco CurrencyShares and KraneShares CSI

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

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

Diversification Opportunities for Invesco CurrencyShares and KraneShares CSI

0.93

Correlation Coefficient

Invesco CurrencyShares  KraneShares CSI

Almost no diversification

The 3 months correlation between Invesco and KraneShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Invesco CurrencyShares Japanes and KraneShares CSI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares CSI China and Invesco CurrencyShares 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 Invesco CurrencyShares Japanese are associated (or correlated) with KraneShares CSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares CSI China has no effect on the direction of Invesco CurrencyShares i.e., Invesco CurrencyShares and KraneShares CSI go up and down completely randomly.

Pair Corralation between Invesco CurrencyShares and KraneShares CSI

Considering the 90-day investment horizon Invesco CurrencyShares is expected to generate 4.36 times less return on investment than KraneShares CSI. But when comparing it to its historical volatility, Invesco CurrencyShares Japanese is 4.68 times less risky than KraneShares CSI. It trades about 0.14 of its potential returns per unit of risk. KraneShares CSI China is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,911  in KraneShares CSI China on December 30, 2024 and sell it today you would earn a total of  593.00  from holding KraneShares CSI China or generate 20.37% return on investment over 90 days.

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

Invesco CurrencyShares Japanes  vs.  KraneShares CSI China

Invesco CurrencyShares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco CurrencyShares Japanese are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Invesco CurrencyShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KraneShares CSI China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, KraneShares CSI sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invesco CurrencyShares and KraneShares CSI

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

The idea behind Invesco CurrencyShares Japanese and KraneShares CSI China 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.