Correlation Between Vanguard Industrials and KraneShares Electric

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

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

Diversification Opportunities for Vanguard Industrials and KraneShares Electric

-0.35

Correlation Coefficient

Vanguard Industrials  KraneShares Electric

Very good diversification

The 3 months correlation between Vanguard and KraneShares is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Industrials Index and KraneShares Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Electric and Vanguard Industrials 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 Vanguard Industrials Index are associated (or correlated) with KraneShares Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Electric has no effect on the direction of Vanguard Industrials i.e., Vanguard Industrials and KraneShares Electric go up and down completely randomly.

Pair Corralation between Vanguard Industrials and KraneShares Electric

Considering the 90-day investment horizon Vanguard Industrials Index is expected to under-perform the KraneShares Electric. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard Industrials Index is 1.09 times less risky than KraneShares Electric. The etf trades about -0.17 of its potential returns per unit of risk. The KraneShares Electric Vehicles is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,183  in KraneShares Electric Vehicles on December 30, 2024 and sell it today you would lose (42.00) from holding KraneShares Electric Vehicles or give up 1.92% of portfolio value over 90 days.

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

Vanguard Industrials Index  vs.  KraneShares Electric Vehicles

Vanguard Industrials

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Industrials Index has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Vanguard Industrials is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

KraneShares Electric

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Electric Vehicles are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, KraneShares Electric is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vanguard Industrials and KraneShares Electric

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

The idea behind Vanguard Industrials Index and KraneShares Electric Vehicles 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.