Correlation Between KraneShares Bosera and WisdomTree China

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

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

Diversification Opportunities for KraneShares Bosera and WisdomTree China

0.98

Correlation Coefficient

KraneShares Bosera  WisdomTree China

Almost no diversification

The 3 months correlation between KraneShares and WisdomTree is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares Bosera MSCI and WisdomTree China ex State Owne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree China and KraneShares Bosera 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 Bosera MSCI are associated (or correlated) with WisdomTree China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree China has no effect on the direction of KraneShares Bosera i.e., KraneShares Bosera and WisdomTree China go up and down completely randomly.

Pair Corralation between KraneShares Bosera and WisdomTree China

Considering the 90-day investment horizon KraneShares Bosera MSCI is expected to generate 0.88 times more return on investment than WisdomTree China. However, KraneShares Bosera MSCI is 1.13 times less risky than WisdomTree China. It trades about -0.06 of its potential returns per unit of risk. WisdomTree China ex State Owned is currently generating about -0.06 per unit of risk. If you would invest  2,478  in KraneShares Bosera MSCI on October 20, 2024 and sell it today you would lose (201.00) from holding KraneShares Bosera MSCI or give up 8.11% of portfolio value over 90 days.

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

KraneShares Bosera MSCI  vs.  WisdomTree China ex State Owne

KraneShares Bosera MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Bosera MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

WisdomTree China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree China ex State Owned has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with KraneShares Bosera and WisdomTree China

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

The idea behind KraneShares Bosera MSCI and WisdomTree China ex State Owned 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.