Correlation Between KraneShares MSCI and KraneShares Emerging

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

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

Diversification Opportunities for KraneShares MSCI and KraneShares Emerging

0.54

Correlation Coefficient

KraneShares MSCI  KraneShares Emerging

Very weak diversification

The 3 months correlation between KraneShares and KraneShares is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI One and KraneShares Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares 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 One 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 KraneShares MSCI i.e., KraneShares MSCI and KraneShares Emerging go up and down completely randomly.

Pair Corralation between KraneShares MSCI and KraneShares Emerging

Given the investment horizon of 90 days KraneShares MSCI is expected to generate 5.72 times less return on investment than KraneShares Emerging. But when comparing it to its historical volatility, KraneShares MSCI One is 2.92 times less risky than KraneShares Emerging. It trades about 0.13 of its potential returns per unit of risk. KraneShares Emerging Markets is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,614  in KraneShares Emerging Markets on December 11, 2024 and sell it today you would earn a total of  318.00  from holding KraneShares Emerging Markets or generate 19.7% return on investment over 90 days.

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

KraneShares MSCI One  vs.  KraneShares Emerging Markets

KraneShares MSCI One

Risk-Adjusted Performance

Very Weak

Over the last 90 days KraneShares MSCI One has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, KraneShares MSCI is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail 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 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, KraneShares Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with KraneShares MSCI and KraneShares Emerging

The main advantage of trading using opposite KraneShares MSCI and KraneShares Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KraneShares MSCI 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 KraneShares MSCI One 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.