Correlation Between WisdomTree China and KraneShares
Can any of the company-specific risk be diversified away by investing in both WisdomTree China and KraneShares 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 WisdomTree China and KraneShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree China ex State Owned and KraneShares, you can compare the effects of market volatilities on WisdomTree China and KraneShares 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 WisdomTree China with a short position of KraneShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree China and KraneShares.
Diversification Opportunities for WisdomTree China and KraneShares
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between WisdomTree and KraneShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree China ex State Owne and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares and WisdomTree China 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 WisdomTree China ex State Owned are associated (or correlated) with KraneShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares has no effect on the direction of WisdomTree China i.e., WisdomTree China and KraneShares go up and down completely randomly.
Pair Corralation between WisdomTree China and KraneShares
Given the investment horizon of 90 days WisdomTree China ex State Owned is expected to under-perform the KraneShares. In addition to that, WisdomTree China is 1.09 times more volatile than KraneShares. It trades about 0.0 of its total potential returns per unit of risk. KraneShares is currently generating about 0.0 per unit of volatility. If you would invest 1,919 in KraneShares on September 3, 2024 and sell it today you would lose (23.00) from holding KraneShares or give up 1.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 30.91% |
| Values | Daily Returns |
WisdomTree China ex State Owne vs. KraneShares
Performance |
| Timeline |
| WisdomTree China |
| KraneShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
WisdomTree China and KraneShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree China and KraneShares
The main advantage of trading using opposite WisdomTree China and KraneShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree China position performs unexpectedly, KraneShares 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 will offset losses from the drop in KraneShares' long position.| WisdomTree China vs. Global X MSCI | WisdomTree China vs. WisdomTree Emerging Markets | WisdomTree China vs. Invesco China Technology | WisdomTree China vs. iShares MSCI China |
| KraneShares vs. Franklin FTSE South | KraneShares vs. Franklin FTSE Japan | KraneShares vs. Franklin FTSE India | KraneShares vs. Franklin FTSE Brazil |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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