Correlation Between KraneShares MSCI and KBND

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

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

Diversification Opportunities for KraneShares MSCI and KBND

0.29

Correlation Coefficient

KraneShares MSCI  KBND

Modest diversification

The 3 months correlation between KraneShares and KBND is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI All and KBND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KBND and KraneShares MSCI 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 KraneShares MSCI All are associated (or correlated) with KBND. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KBND has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and KBND go up and down completely randomly.

Pair Corralation between KraneShares MSCI and KBND

If you would invest  3,069  in KBND on September 18, 2024 and sell it today you would earn a total of  0.00  from holding KBND or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

KraneShares MSCI All  vs.  KBND

KraneShares MSCI All

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, KraneShares MSCI disclosed solid returns over the last few months and may actually be approaching a breakup point.

KBND

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KraneShares MSCI and KBND

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

The idea behind KraneShares MSCI All and KBND 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.