Correlation Between Microsoft and KraneShares Emerging

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

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

Diversification Opportunities for Microsoft and KraneShares Emerging

-0.74

Correlation Coefficient

Microsoft  KraneShares Emerging

Pay attention - limited upside

The 3 months correlation between Microsoft and KraneShares is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and KraneShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Emerging and Microsoft 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 Microsoft are associated (or correlated) with KraneShares Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Emerging has no effect on the direction of Microsoft i.e., Microsoft and KraneShares Emerging go up and down completely randomly.

Pair Corralation between Microsoft and KraneShares Emerging

Given the investment horizon of 90 days Microsoft is expected to under-perform the KraneShares Emerging. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.09 times less risky than KraneShares Emerging. The stock trades about -0.1 of its potential returns per unit of risk. The KraneShares Emerging Markets is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,708  in KraneShares Emerging Markets on December 23, 2024 and sell it today you would earn a total of  230.00  from holding KraneShares Emerging Markets or generate 13.47% return on investment over 90 days.

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

Microsoft  vs.  KraneShares Emerging Markets

Microsoft

Risk-Adjusted Performance

Very Weak

Over the last 90 days Microsoft has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

KraneShares Emerging

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Emerging Markets are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, KraneShares Emerging reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Microsoft and KraneShares Emerging

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

The idea behind Microsoft and KraneShares Emerging Markets 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.