Correlation Between KraneShares MSCI and KraneShares CSI

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

Diversification Opportunities for KraneShares MSCI and KraneShares CSI

0.59

Correlation Coefficient

KraneShares MSCI  KraneShares CSI

Very weak diversification

The 3 months correlation between KraneShares and KraneShares is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI All and KraneShares CSI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares CSI 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 All are associated (or correlated) with KraneShares CSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares CSI China has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and KraneShares CSI go up and down completely randomly.

Pair Corralation between KraneShares MSCI and KraneShares CSI

Given the investment horizon of 90 days KraneShares MSCI is expected to generate 1.15 times less return on investment than KraneShares CSI. But when comparing it to its historical volatility, KraneShares MSCI All is 1.18 times less risky than KraneShares CSI. It trades about 0.16 of its potential returns per unit of risk. KraneShares CSI China is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,088  in KraneShares CSI China on December 3, 2024 and sell it today you would earn a total of  246.00  from holding KraneShares CSI China or generate 7.97% return on investment over 90 days.

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

KraneShares MSCI All  vs.  KraneShares CSI China

KraneShares MSCI All

Risk-Adjusted Performance

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 rather sound basic indicators, KraneShares MSCI is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

KraneShares CSI China

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent technical and fundamental indicators, KraneShares CSI may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KraneShares MSCI and KraneShares CSI

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

The idea behind KraneShares MSCI All and KraneShares CSI 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.