Correlation Between Invesco Emerging and KraneShares Asia

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

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

Diversification Opportunities for Invesco Emerging and KraneShares Asia

-0.6

Correlation Coefficient

Invesco Emerging  KraneShares Asia

Excellent diversification

The 3 months correlation between Invesco and KraneShares is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Invesco Emerging Markets and KraneShares Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Asia Pacific and Invesco Emerging 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 Invesco Emerging Markets are associated (or correlated) with KraneShares Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Asia Pacific has no effect on the direction of Invesco Emerging i.e., Invesco Emerging and KraneShares Asia go up and down completely randomly.

Pair Corralation between Invesco Emerging and KraneShares Asia

Considering the 90-day investment horizon Invesco Emerging Markets is expected to generate 1.39 times more return on investment than KraneShares Asia. However, Invesco Emerging is 1.39 times more volatile than KraneShares Asia Pacific. It trades about 0.14 of its potential returns per unit of risk. KraneShares Asia Pacific is currently generating about -0.15 per unit of risk. If you would invest  2,025  in Invesco Emerging Markets on September 19, 2024 and sell it today you would earn a total of  33.00  from holding Invesco Emerging Markets or generate 1.63% return on investment over 90 days.

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

Invesco Emerging Markets  vs.  KraneShares Asia Pacific

Invesco Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Invesco Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

KraneShares Asia Pacific

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Asia Pacific are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KraneShares Asia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco Emerging and KraneShares Asia

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

The idea behind Invesco Emerging Markets and KraneShares Asia Pacific 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.