Correlation Between Consumer Discretionary and KraneShares Trust

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

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

Diversification Opportunities for Consumer Discretionary and KraneShares Trust

-0.51

Correlation Coefficient

Consumer Discretionary  KraneShares Trust

Excellent diversification

The 3 months correlation between Consumer and KraneShares is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and KraneShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Trust and Consumer Discretionary 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 Consumer Discretionary Select 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 Consumer Discretionary i.e., Consumer Discretionary and KraneShares Trust go up and down completely randomly.

Pair Corralation between Consumer Discretionary and KraneShares Trust

Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 0.78 times more return on investment than KraneShares Trust. However, Consumer Discretionary Select is 1.29 times less risky than KraneShares Trust. It trades about 0.28 of its potential returns per unit of risk. KraneShares Trust is currently generating about -0.04 per unit of risk. If you would invest  18,417  in Consumer Discretionary Select on September 1, 2024 and sell it today you would earn a total of  3,813  from holding Consumer Discretionary Select or generate 20.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Consumer Discretionary Select  vs.  KraneShares Trust

Consumer Discretionary

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Select are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Consumer Discretionary showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Consumer Discretionary and KraneShares Trust

The main advantage of trading using opposite Consumer Discretionary and KraneShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary 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 Consumer Discretionary Select 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..