Correlation Between KraneShares MSCI and Invesco Golden

Can any of the company-specific risk be diversified away by investing in both KraneShares MSCI and Invesco Golden 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 Invesco Golden 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 Invesco Golden Dragon, you can compare the effects of market volatilities on KraneShares MSCI and Invesco Golden 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 Invesco Golden. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares MSCI and Invesco Golden.

Diversification Opportunities for KraneShares MSCI and Invesco Golden

0.94

Correlation Coefficient

KraneShares MSCI  Invesco Golden

Almost no diversification

The 3 months correlation between KraneShares and Invesco is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI All and Invesco Golden Dragon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Golden Dragon 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 Invesco Golden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Golden Dragon has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and Invesco Golden go up and down completely randomly.

Pair Corralation between KraneShares MSCI and Invesco Golden

Given the investment horizon of 90 days KraneShares MSCI is expected to generate 1.5 times less return on investment than Invesco Golden. In addition to that, KraneShares MSCI is 1.0 times more volatile than Invesco Golden Dragon. It trades about 0.04 of its total potential returns per unit of risk. Invesco Golden Dragon is currently generating about 0.06 per unit of volatility. If you would invest  2,277  in Invesco Golden Dragon on September 23, 2024 and sell it today you would earn a total of  367.00  from holding Invesco Golden Dragon or generate 16.12% return on investment over 90 days.

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

KraneShares MSCI All  vs.  Invesco Golden Dragon

KraneShares MSCI All

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite sluggish essential indicators, KraneShares MSCI may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Invesco Golden Dragon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Golden Dragon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical and fundamental indicators, Invesco Golden revealed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KraneShares MSCI and Invesco Golden

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

The idea behind KraneShares MSCI All and Invesco Golden Dragon 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.