Correlation Between KraneShares Global and KraneShares California

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

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

Diversification Opportunities for KraneShares Global and KraneShares California

0.49

Correlation Coefficient

KraneShares Global  KraneShares California

Very weak diversification

The 3 months correlation between KraneShares and KraneShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares Global Carbon and KraneShares California Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares California and KraneShares Global 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 Global Carbon are associated (or correlated) with KraneShares California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares California has no effect on the direction of KraneShares Global i.e., KraneShares Global and KraneShares California go up and down completely randomly.

Pair Corralation between KraneShares Global and KraneShares California

Given the investment horizon of 90 days KraneShares Global Carbon is expected to under-perform the KraneShares California. But the etf apears to be less risky and, when comparing its historical volatility, KraneShares Global Carbon is 1.3 times less risky than KraneShares California. The etf trades about -0.07 of its potential returns per unit of risk. The KraneShares California Carbon is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,128  in KraneShares California Carbon on September 13, 2024 and sell it today you would lose (102.00) from holding KraneShares California Carbon or give up 4.79% of portfolio value over 90 days.

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

KraneShares Global Carbon  vs.  KraneShares California Carbon

KraneShares Global Carbon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares Global Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, KraneShares Global is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

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 somewhat strong fundamental indicators, KraneShares California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KraneShares Global and KraneShares California

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

The idea behind KraneShares Global Carbon and KraneShares California Carbon 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.