Correlation Between IShares Core and KraneShares MSCI

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

Diversification Opportunities for IShares Core and KraneShares MSCI

-0.34

Correlation Coefficient

IShares Core  KraneShares MSCI

Very good diversification

The 3 months correlation between IShares and KraneShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and KraneShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI China and IShares Core 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 Core SP 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 China has no effect on the direction of IShares Core i.e., IShares Core and KraneShares MSCI go up and down completely randomly.

Pair Corralation between IShares Core and KraneShares MSCI

Considering the 90-day investment horizon iShares Core SP is expected to generate 0.39 times more return on investment than KraneShares MSCI. However, iShares Core SP is 2.54 times less risky than KraneShares MSCI. It trades about 0.13 of its potential returns per unit of risk. KraneShares MSCI China is currently generating about -0.01 per unit of risk. If you would invest  37,007  in iShares Core SP on September 26, 2024 and sell it today you would earn a total of  23,429  from holding iShares Core SP or generate 63.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

iShares Core SP  vs.  KraneShares MSCI China

iShares Core SP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

KraneShares MSCI China

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very 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 Core and KraneShares MSCI

The main advantage of trading using opposite IShares Core and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and KraneShares MSCI 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.