Correlation Between KraneShares CSI and KraneShares SSE

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

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

Diversification Opportunities for KraneShares CSI and KraneShares SSE

0.66

Correlation Coefficient

KraneShares CSI  KraneShares SSE

Poor diversification

The 3 months correlation between KraneShares and KraneShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares CSI China and KraneShares SSE STAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares SSE STAR and KraneShares CSI 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 CSI China are associated (or correlated) with KraneShares SSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares SSE STAR has no effect on the direction of KraneShares CSI i.e., KraneShares CSI and KraneShares SSE go up and down completely randomly.

Pair Corralation between KraneShares CSI and KraneShares SSE

Given the investment horizon of 90 days KraneShares CSI is expected to generate 1.08 times less return on investment than KraneShares SSE. But when comparing it to its historical volatility, KraneShares CSI China is 1.14 times less risky than KraneShares SSE. It trades about 0.06 of its potential returns per unit of risk. KraneShares SSE STAR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,286  in KraneShares SSE STAR on September 24, 2024 and sell it today you would earn a total of  38.00  from holding KraneShares SSE STAR or generate 2.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

KraneShares CSI China  vs.  KraneShares SSE STAR

KraneShares CSI China

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares CSI China are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, KraneShares CSI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

KraneShares SSE STAR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares SSE STAR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, KraneShares SSE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KraneShares CSI and KraneShares SSE

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

The idea behind KraneShares CSI China and KraneShares SSE STAR 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.