Correlation Between Franklin FTSE and KraneShares Trust

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

By analyzing existing cross correlation between Franklin FTSE Brazil and KraneShares Trust, you can compare the effects of market volatilities on Franklin FTSE and KraneShares Trust 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 Franklin FTSE with a short position of KraneShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Franklin FTSE and KraneShares Trust.

Diversification Opportunities for Franklin FTSE and KraneShares Trust

-0.05

Correlation Coefficient

Franklin FTSE  KraneShares Trust

Good diversification

The 3 months correlation between Franklin and KraneShares is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Franklin FTSE Brazil and KraneShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Trust and Franklin FTSE 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 Franklin FTSE Brazil are associated (or correlated) with KraneShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares Trust has no effect on the direction of Franklin FTSE i.e., Franklin FTSE and KraneShares Trust go up and down completely randomly.

Pair Corralation between Franklin FTSE and KraneShares Trust

Given the investment horizon of 90 days Franklin FTSE Brazil is expected to under-perform the KraneShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, Franklin FTSE Brazil is 1.87 times less risky than KraneShares Trust. The etf trades about -0.09 of its potential returns per unit of risk. The KraneShares Trust is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,387  in KraneShares Trust on September 12, 2024 and sell it today you would earn a total of  359.50  from holding KraneShares Trust or generate 15.06% return on investment over 90 days.

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

Franklin FTSE Brazil  vs.  KraneShares Trust

Franklin FTSE Brazil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Franklin FTSE Brazil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Etf's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

KraneShares Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, KraneShares Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Franklin FTSE and KraneShares Trust

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

The idea behind Franklin FTSE Brazil and KraneShares Trust 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..