Correlation Between KraneShares California and SPDR Gold

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

By analyzing existing cross correlation between KraneShares California Carbon and SPDR Gold Shares, you can compare the effects of market volatilities on KraneShares California and SPDR Gold 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 KraneShares California with a short position of SPDR Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares California and SPDR Gold.

Diversification Opportunities for KraneShares California and SPDR Gold

0.4

Correlation Coefficient

KraneShares California  SPDR Gold

Very weak diversification

The 3 months correlation between KraneShares and SPDR is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares California Carbon and SPDR Gold Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Shares and KraneShares California 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 KraneShares California Carbon are associated (or correlated) with SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Shares has no effect on the direction of KraneShares California i.e., KraneShares California and SPDR Gold go up and down completely randomly.

Pair Corralation between KraneShares California and SPDR Gold

Given the investment horizon of 90 days KraneShares California Carbon is expected to under-perform the SPDR Gold. In addition to that, KraneShares California is 1.59 times more volatile than SPDR Gold Shares. It trades about -0.06 of its total potential returns per unit of risk. SPDR Gold Shares is currently generating about 0.08 per unit of volatility. If you would invest  23,868  in SPDR Gold Shares on September 13, 2024 and sell it today you would earn a total of  1,228  from holding SPDR Gold Shares or generate 5.14% return on investment over 90 days.

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

KraneShares California Carbon  vs.  SPDR Gold Shares

KraneShares California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares California Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

SPDR Gold Shares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Shares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, SPDR Gold is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with KraneShares California and SPDR Gold

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

The idea behind KraneShares California Carbon and SPDR Gold Shares 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.