Correlation Between IShares Consumer and KraneShares Trust

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

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

Diversification Opportunities for IShares Consumer and KraneShares Trust

0.51

Correlation Coefficient

IShares Consumer  KraneShares Trust

Very weak diversification

The 3 months correlation between IShares and KraneShares is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and KraneShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Trust and IShares Consumer 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 Consumer Discretionary are associated (or correlated) with KraneShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Trust has no effect on the direction of IShares Consumer i.e., IShares Consumer and KraneShares Trust go up and down completely randomly.

Pair Corralation between IShares Consumer and KraneShares Trust

Considering the 90-day investment horizon iShares Consumer Discretionary is expected to under-perform the KraneShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, iShares Consumer Discretionary is 1.27 times less risky than KraneShares Trust. The etf trades about -0.01 of its potential returns per unit of risk. The KraneShares Trust is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,290  in KraneShares Trust on November 28, 2024 and sell it today you would earn a total of  307.00  from holding KraneShares Trust or generate 13.41% return on investment over 90 days.

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

iShares Consumer Discretionary  vs.  KraneShares Trust

iShares Consumer Dis

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Consumer Discretionary has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Consumer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

KraneShares Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, KraneShares Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Consumer and KraneShares Trust

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

The idea behind iShares Consumer Discretionary and KraneShares Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.