Correlation Between Vanguard Growth and KraneShares MSCI

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

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

Diversification Opportunities for Vanguard Growth and KraneShares MSCI

-0.36

Correlation Coefficient

Vanguard Growth  KraneShares MSCI

Very good diversification

The 3 months correlation between Vanguard and KraneShares is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and KraneShares MSCI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI China and Vanguard Growth 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 Growth Index are associated (or correlated) with KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI China has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and KraneShares MSCI go up and down completely randomly.

Pair Corralation between Vanguard Growth and KraneShares MSCI

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 0.53 times more return on investment than KraneShares MSCI. However, Vanguard Growth Index is 1.9 times less risky than KraneShares MSCI. It trades about 0.13 of its potential returns per unit of risk. KraneShares MSCI China is currently generating about -0.01 per unit of risk. If you would invest  21,354  in Vanguard Growth Index on September 28, 2024 and sell it today you would earn a total of  20,406  from holding Vanguard Growth Index or generate 95.56% return on investment over 90 days.

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

Vanguard Growth Index  vs.  KraneShares MSCI China

Vanguard Growth Index

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KraneShares MSCI China

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares MSCI China has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, KraneShares MSCI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vanguard Growth and KraneShares MSCI

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

The idea behind Vanguard Growth Index and KraneShares MSCI China 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.