Correlation Between KraneShares MSCI and Xtrackers Harvest

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

By analyzing existing cross correlation between KraneShares MSCI All and Xtrackers Harvest CSI, you can compare the effects of market volatilities on KraneShares MSCI and Xtrackers Harvest 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 Xtrackers Harvest. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares MSCI and Xtrackers Harvest.

Diversification Opportunities for KraneShares MSCI and Xtrackers Harvest

0.96

Correlation Coefficient

KraneShares MSCI  Xtrackers Harvest

Almost no diversification

The 3 months correlation between KraneShares and Xtrackers is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI All and Xtrackers Harvest CSI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers Harvest CSI 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 All are associated (or correlated) with Xtrackers Harvest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers Harvest CSI has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and Xtrackers Harvest go up and down completely randomly.

Pair Corralation between KraneShares MSCI and Xtrackers Harvest

Given the investment horizon of 90 days KraneShares MSCI is expected to generate 1.32 times less return on investment than Xtrackers Harvest. But when comparing it to its historical volatility, KraneShares MSCI All is 1.07 times less risky than Xtrackers Harvest. It trades about 0.09 of its potential returns per unit of risk. Xtrackers Harvest CSI is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,250  in Xtrackers Harvest CSI on September 12, 2024 and sell it today you would earn a total of  511.00  from holding Xtrackers Harvest CSI or generate 22.71% return on investment over 90 days.

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

KraneShares MSCI All  vs.  Xtrackers Harvest CSI

KraneShares MSCI All

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, KraneShares MSCI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Xtrackers Harvest CSI

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers Harvest CSI are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent technical indicators, Xtrackers Harvest reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KraneShares MSCI and Xtrackers Harvest

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

The idea behind KraneShares MSCI All and Xtrackers Harvest CSI 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.