Correlation Between Vanguard Total and KraneShares Emerging

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

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

Diversification Opportunities for Vanguard Total and KraneShares Emerging

-0.54

Correlation Coefficient

Vanguard Total  KraneShares Emerging

Excellent diversification

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

Pair Corralation between Vanguard Total and KraneShares Emerging

Considering the 90-day investment horizon Vanguard Total Stock is expected to generate 0.5 times more return on investment than KraneShares Emerging. However, Vanguard Total Stock is 2.0 times less risky than KraneShares Emerging. It trades about 0.11 of its potential returns per unit of risk. KraneShares Emerging Markets is currently generating about 0.03 per unit of risk. If you would invest  21,812  in Vanguard Total Stock on October 4, 2024 and sell it today you would earn a total of  7,114  from holding Vanguard Total Stock or generate 32.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.7%
Values	Daily Returns

Vanguard Total Stock  vs.  KraneShares Emerging Markets

Vanguard Total Stock

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Total Stock are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Vanguard Total is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

KraneShares Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Etf's primary indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

Pair Trading with Vanguard Total and KraneShares Emerging

The main advantage of trading using opposite Vanguard Total and KraneShares Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Total 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 Vanguard Total Stock 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.