Correlation Between KraneShares California and KraneShares Global

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

Diversification Opportunities for KraneShares California and KraneShares Global

0.35

Correlation Coefficient

KraneShares California  KraneShares Global

Weak diversification

The 3 months correlation between KraneShares and KraneShares is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares California Carbon and KraneShares Global Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Global Carbon 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 KraneShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Global Carbon has no effect on the direction of KraneShares California i.e., KraneShares California and KraneShares Global go up and down completely randomly.

Pair Corralation between KraneShares California and KraneShares Global

Given the investment horizon of 90 days KraneShares California Carbon is expected to under-perform the KraneShares Global. In addition to that, KraneShares California is 1.47 times more volatile than KraneShares Global Carbon. It trades about -0.17 of its total potential returns per unit of risk. KraneShares Global Carbon is currently generating about -0.01 per unit of volatility. If you would invest  2,990  in KraneShares Global Carbon on October 25, 2024 and sell it today you would lose (34.00) from holding KraneShares Global Carbon or give up 1.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

KraneShares California Carbon  vs.  KraneShares Global Carbon

KraneShares California

Risk-Adjusted Performance

0 of 100

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 February 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

KraneShares Global Carbon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Global Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, KraneShares Global 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 KraneShares Global

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

The idea behind KraneShares California Carbon and KraneShares Global Carbon 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.