Correlation Between IShares Aerospace and KraneShares Electric

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

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

Diversification Opportunities for IShares Aerospace and KraneShares Electric

0.16

Correlation Coefficient

IShares Aerospace  KraneShares Electric

Average diversification

The 3 months correlation between IShares and KraneShares is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aerospace Defense and KraneShares Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Electric and IShares Aerospace 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 Aerospace Defense are associated (or correlated) with KraneShares Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Electric has no effect on the direction of IShares Aerospace i.e., IShares Aerospace and KraneShares Electric go up and down completely randomly.

Pair Corralation between IShares Aerospace and KraneShares Electric

Considering the 90-day investment horizon iShares Aerospace Defense is expected to generate 0.78 times more return on investment than KraneShares Electric. However, iShares Aerospace Defense is 1.28 times less risky than KraneShares Electric. It trades about 0.08 of its potential returns per unit of risk. KraneShares Electric Vehicles is currently generating about 0.01 per unit of risk. If you would invest  14,547  in iShares Aerospace Defense on December 30, 2024 and sell it today you would earn a total of  776.00  from holding iShares Aerospace Defense or generate 5.33% return on investment over 90 days.

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

iShares Aerospace Defense  vs.  KraneShares Electric Vehicles

iShares Aerospace Defense

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Aerospace Defense are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IShares Aerospace is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KraneShares Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Electric Vehicles are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, KraneShares Electric is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Aerospace and KraneShares Electric

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

The idea behind iShares Aerospace Defense and KraneShares Electric Vehicles 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.