Correlation Between KraneShares European and KSET

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

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

Diversification Opportunities for KraneShares European and KSET

0.28

Correlation Coefficient

KraneShares European  KSET

Modest diversification

The 3 months correlation between KraneShares and KSET is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares European Carbon and KSET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSET and KraneShares European 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 European Carbon are associated (or correlated) with KSET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSET has no effect on the direction of KraneShares European i.e., KraneShares European and KSET go up and down completely randomly.

Pair Corralation between KraneShares European and KSET

If you would invest  2,292  in KraneShares European Carbon on September 12, 2024 and sell it today you would earn a total of  11.73  from holding KraneShares European Carbon or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

KraneShares European Carbon  vs.  KSET

KraneShares European

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares European Carbon are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KraneShares European is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KSET

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KSET has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, KSET is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KraneShares European and KSET

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

The idea behind KraneShares European Carbon and KSET 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.