Correlation Between KraneShares California and IPath Series

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

By analyzing existing cross correlation between KraneShares California Carbon and iPath Series B, you can compare the effects of market volatilities on KraneShares California and IPath Series 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 California with a short position of IPath Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares California and IPath Series.

Diversification Opportunities for KraneShares California and IPath Series

-0.36

Correlation Coefficient

KraneShares California  IPath Series

Very good diversification

The 3 months correlation between KraneShares and IPath is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares California Carbon and iPath Series B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iPath Series B and KraneShares California 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 California Carbon are associated (or correlated) with IPath Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iPath Series B has no effect on the direction of KraneShares California i.e., KraneShares California and IPath Series go up and down completely randomly.

Pair Corralation between KraneShares California and IPath Series

Given the investment horizon of 90 days KraneShares California Carbon is expected to under-perform the IPath Series. But the etf apears to be less risky and, when comparing its historical volatility, KraneShares California Carbon is 1.12 times less risky than IPath Series. The etf trades about -0.12 of its potential returns per unit of risk. The iPath Series B is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,799  in iPath Series B on December 29, 2024 and sell it today you would lose (109.00) from holding iPath Series B or give up 3.89% of portfolio value over 90 days.

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

KraneShares California Carbon  vs.  iPath Series B

KraneShares California

Risk-Adjusted Performance

Very Weak

Over the last 90 days KraneShares California Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Etf's fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

iPath Series B

Risk-Adjusted Performance

Very Weak

Over the last 90 days iPath Series B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IPath Series is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with KraneShares California and IPath Series

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

The idea behind KraneShares California Carbon and iPath Series B 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.