Correlation Between WisdomTree Emerging and KraneShares MSCI
Can any of the company-specific risk be diversified away by investing in both WisdomTree Emerging and KraneShares MSCI 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 Emerging and KraneShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WisdomTree Emerging Markets and KraneShares MSCI Emerging, you can compare the effects of market volatilities on WisdomTree Emerging and KraneShares MSCI 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 Emerging with a short position of KraneShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree Emerging and KraneShares MSCI.
Diversification Opportunities for WisdomTree Emerging and KraneShares MSCI
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between WisdomTree and KraneShares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and KraneShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI Emerging and WisdomTree Emerging 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 Emerging Markets are associated (or correlated) with KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI Emerging has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and KraneShares MSCI go up and down completely randomly.
Pair Corralation between WisdomTree Emerging and KraneShares MSCI
Considering the 90-day investment horizon WisdomTree Emerging Markets is expected to generate 0.98 times more return on investment than KraneShares MSCI. However, WisdomTree Emerging Markets is 1.02 times less risky than KraneShares MSCI. It trades about -0.1 of its potential returns per unit of risk. KraneShares MSCI Emerging is currently generating about -0.11 per unit of risk. If you would invest 5,117 in WisdomTree Emerging Markets on September 1, 2024 and sell it today you would lose (91.00) from holding WisdomTree Emerging Markets or give up 1.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
WisdomTree Emerging Markets vs. KraneShares MSCI Emerging
Performance |
| Timeline |
| WisdomTree Emerging |
| KraneShares MSCI Emerging |
WisdomTree Emerging and KraneShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WisdomTree Emerging and KraneShares MSCI
The main advantage of trading using opposite WisdomTree Emerging and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging position performs unexpectedly, KraneShares MSCI 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 MSCI will offset losses from the drop in KraneShares MSCI's long position.The idea behind WisdomTree Emerging Markets and KraneShares MSCI Emerging 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.
| KraneShares MSCI vs. Xtrackers MSCI Emerging | KraneShares MSCI vs. FlexShares Morningstar Emerging | KraneShares MSCI vs. First Trust Emerging |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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