Correlation Between KBUY and KraneShares MSCI

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

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

Diversification Opportunities for KBUY and KraneShares MSCI

-0.07

Correlation Coefficient

KBUY  KraneShares MSCI

Good diversification

The 3 months correlation between KBUY and KraneShares is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding KBUY 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 KBUY 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 KBUY 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 KBUY i.e., KBUY and KraneShares MSCI go up and down completely randomly.

Pair Corralation between KBUY and KraneShares MSCI

Given the investment horizon of 90 days KBUY is expected to under-perform the KraneShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, KBUY is 1.4 times less risky than KraneShares MSCI. The etf trades about -0.04 of its potential returns per unit of risk. The KraneShares MSCI China is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,698  in KraneShares MSCI China on September 20, 2024 and sell it today you would lose (459.00) from holding KraneShares MSCI China or give up 17.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.43%
Values	Daily Returns

KBUY  vs.  KraneShares MSCI China

KBUY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KBUY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, KBUY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KraneShares MSCI China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, KraneShares MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KBUY and KraneShares MSCI

The main advantage of trading using opposite KBUY and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KBUY 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 KBUY 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..