Correlation Between KraneShares MSCI and SPDR SP

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

Diversification Opportunities for KraneShares MSCI and SPDR SP

0.88

Correlation Coefficient

KraneShares MSCI  SPDR SP

Very poor diversification

The 3 months correlation between KraneShares and SPDR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI All and SPDR SP Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Emerging 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Emerging has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and SPDR SP go up and down completely randomly.

Pair Corralation between KraneShares MSCI and SPDR SP

Given the investment horizon of 90 days KraneShares MSCI All is expected to under-perform the SPDR SP. In addition to that, KraneShares MSCI is 2.59 times more volatile than SPDR SP Emerging. It trades about -0.11 of its total potential returns per unit of risk. SPDR SP Emerging is currently generating about -0.1 per unit of volatility. If you would invest  12,452  in SPDR SP Emerging on October 3, 2024 and sell it today you would lose (896.00) from holding SPDR SP Emerging or give up 7.2% of portfolio value over 90 days.

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

KraneShares MSCI All  vs.  SPDR SP Emerging

KraneShares MSCI All

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares MSCI All has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

SPDR SP Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Emerging has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Etf's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with KraneShares MSCI and SPDR SP

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

The idea behind KraneShares MSCI All and SPDR SP Emerging 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.