Correlation Between KraneShares MSCI and IShares MSCI

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

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

Diversification Opportunities for KraneShares MSCI and IShares MSCI

0.91

Correlation Coefficient

KraneShares MSCI  IShares MSCI

Almost no diversification

The 3 months correlation between KraneShares and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI China and iShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI China 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 China are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI China has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and IShares MSCI go up and down completely randomly.

Pair Corralation between KraneShares MSCI and IShares MSCI

Given the investment horizon of 90 days KraneShares MSCI China is expected to generate 1.14 times more return on investment than IShares MSCI. However, KraneShares MSCI is 1.14 times more volatile than iShares MSCI China. It trades about -0.03 of its potential returns per unit of risk. iShares MSCI China is currently generating about -0.06 per unit of risk. If you would invest  2,206  in KraneShares MSCI China on October 15, 2024 and sell it today you would lose (113.00) from holding KraneShares MSCI China or give up 5.12% of portfolio value over 90 days.

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

KraneShares MSCI China  vs.  iShares MSCI China

KraneShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

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

iShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares MSCI China has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the Etf traders.

Pair Trading with KraneShares MSCI and IShares MSCI

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

The idea behind KraneShares MSCI China and iShares 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.