Correlation Between Nasdaq and KraneShares Global

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

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

Diversification Opportunities for Nasdaq and KraneShares Global

0.46

Correlation Coefficient

Nasdaq  KraneShares Global

Very weak diversification

The 3 months correlation between Nasdaq and KraneShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and KraneShares Global Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Global Carbon and Nasdaq 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 Nasdaq Inc are associated (or correlated) with KraneShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Global Carbon has no effect on the direction of Nasdaq i.e., Nasdaq and KraneShares Global go up and down completely randomly.

Pair Corralation between Nasdaq and KraneShares Global

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the KraneShares Global. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.05 times less risky than KraneShares Global. The stock trades about -0.02 of its potential returns per unit of risk. The KraneShares Global Carbon is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,875  in KraneShares Global Carbon on December 27, 2024 and sell it today you would lose (54.00) from holding KraneShares Global Carbon or give up 1.88% of portfolio value over 90 days.

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

Nasdaq Inc  vs.  KraneShares Global Carbon

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

KraneShares Global Carbon

Risk-Adjusted Performance

Very Weak

Over the last 90 days KraneShares Global Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, KraneShares Global is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nasdaq and KraneShares Global

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

The idea behind Nasdaq Inc and KraneShares Global Carbon 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.