Correlation Between KraneShares Trust and Invesco Dynamic

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

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

Diversification Opportunities for KraneShares Trust and Invesco Dynamic

0.07

Correlation Coefficient

KraneShares Trust  Invesco Dynamic

Significant diversification

The 3 months correlation between KraneShares and Invesco is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares Trust and Invesco Dynamic Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Food and KraneShares Trust 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 Trust are associated (or correlated) with Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Food has no effect on the direction of KraneShares Trust i.e., KraneShares Trust and Invesco Dynamic go up and down completely randomly.

Pair Corralation between KraneShares Trust and Invesco Dynamic

Given the investment horizon of 90 days KraneShares Trust is expected to under-perform the Invesco Dynamic. In addition to that, KraneShares Trust is 2.14 times more volatile than Invesco Dynamic Food. It trades about -0.04 of its total potential returns per unit of risk. Invesco Dynamic Food is currently generating about 0.09 per unit of volatility. If you would invest  4,710  in Invesco Dynamic Food on September 3, 2024 and sell it today you would earn a total of  184.00  from holding Invesco Dynamic Food or generate 3.91% return on investment over 90 days.

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

KraneShares Trust  vs.  Invesco Dynamic Food

KraneShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, KraneShares Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Invesco Dynamic Food

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Dynamic Food are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady fundamental drivers, Invesco Dynamic is not utilizing all of its potentials. The newest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with KraneShares Trust and Invesco Dynamic

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

The idea behind KraneShares Trust and Invesco Dynamic Food 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.