Correlation Between Dow Jones and KraneShares Trust
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and KraneShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and KraneShares Trust, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of KraneShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and KraneShares Trust.
Diversification Opportunities for Dow Jones and KraneShares Trust
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dow and KraneShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and KraneShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Trust and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and KraneShares Trust go up and down completely randomly.
Pair Corralation between Dow Jones and KraneShares Trust
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 1.66 times more return on investment than KraneShares Trust. However, Dow Jones is 1.66 times more volatile than KraneShares Trust. It trades about 0.08 of its potential returns per unit of risk. KraneShares Trust is currently generating about 0.1 per unit of risk. If you would invest 3,394,710 in Dow Jones Industrial on August 24, 2024 and sell it today you would earn a total of 992,325 from holding Dow Jones Industrial or generate 29.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 40.4% |
| Values | Daily Returns |
Dow Jones Industrial vs. KraneShares Trust
Performance |
| Timeline |
Dow Jones and KraneShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
KraneShares Trust
Pair trading matchups for KraneShares Trust
Pair Trading with Dow Jones and KraneShares Trust
The main advantage of trading using opposite Dow Jones and KraneShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Barrick Gold Corp | Dow Jones vs. Jutal Offshore Oil | Dow Jones vs. Eastern Co | Dow Jones vs. Weyco Group |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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