Correlation Between KraneShares MSCI and Global X

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

Diversification Opportunities for KraneShares MSCI and Global X

0.87

Correlation Coefficient

KraneShares MSCI  Global X

Very poor diversification

The 3 months correlation between KraneShares and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI All and Global X MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MSCI 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MSCI has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and Global X go up and down completely randomly.

Pair Corralation between KraneShares MSCI and Global X

Given the investment horizon of 90 days KraneShares MSCI is expected to generate 1.45 times less return on investment than Global X. But when comparing it to its historical volatility, KraneShares MSCI All is 1.04 times less risky than Global X. It trades about 0.09 of its potential returns per unit of risk. Global X MSCI is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,620  in Global X MSCI on September 13, 2024 and sell it today you would earn a total of  420.00  from holding Global X MSCI or generate 25.93% return on investment over 90 days.

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

KraneShares MSCI All  vs.  Global X MSCI

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.

Global X MSCI

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MSCI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Global X reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KraneShares MSCI and Global X

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

The idea behind KraneShares MSCI All and Global X MSCI 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..