Correlation Between KraneShares MSCI and Global X

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

Diversification Opportunities for KraneShares MSCI and Global X

0.32

Correlation Coefficient

KraneShares MSCI  Global X

Weak diversification

The 3 months correlation between KraneShares and Global is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI One and Global X Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Infrastructure 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Infrastructure has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and Global X go up and down completely randomly.

Pair Corralation between KraneShares MSCI and Global X

Given the investment horizon of 90 days KraneShares MSCI One is expected to generate 0.52 times more return on investment than Global X. However, KraneShares MSCI One is 1.92 times less risky than Global X. It trades about -0.04 of its potential returns per unit of risk. Global X Infrastructure is currently generating about -0.19 per unit of risk. If you would invest  2,146  in KraneShares MSCI One on December 4, 2024 and sell it today you would lose (37.00) from holding KraneShares MSCI One or give up 1.72% of portfolio value over 90 days.

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

KraneShares MSCI One  vs.  Global X Infrastructure

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.

Global X Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global X Infrastructure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with KraneShares MSCI and Global X

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

The idea behind KraneShares MSCI One and Global X Infrastructure 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.