Correlation Between Global X and KraneShares Electric

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

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

Diversification Opportunities for Global X and KraneShares Electric

0.8

Correlation Coefficient

Global X  KraneShares Electric

Very poor diversification

The 3 months correlation between Global and KraneShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Global X Autonomous and KraneShares Electric Vehicles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Electric and Global X 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 Global X Autonomous 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 Global X i.e., Global X and KraneShares Electric go up and down completely randomly.

Pair Corralation between Global X and KraneShares Electric

Given the investment horizon of 90 days Global X Autonomous is expected to generate 0.4 times more return on investment than KraneShares Electric. However, Global X Autonomous is 2.52 times less risky than KraneShares Electric. It trades about 0.0 of its potential returns per unit of risk. KraneShares Electric Vehicles is currently generating about -0.08 per unit of risk. If you would invest  2,394  in Global X Autonomous on September 12, 2024 and sell it today you would lose (4.00) from holding Global X Autonomous or give up 0.17% of portfolio value over 90 days.

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

Global X Autonomous  vs.  KraneShares Electric Vehicles

Global X Autonomous

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Autonomous are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in January 2025.

KraneShares Electric

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Electric Vehicles are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, KraneShares Electric unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Global X and KraneShares Electric

The main advantage of trading using opposite Global X and KraneShares Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global X 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 Global X Autonomous 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.