Correlation Between KraneShares and First Trust
Can any of the company-specific risk be diversified away by investing in both KraneShares and First 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 KraneShares and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KraneShares and First Trust Emerging, you can compare the effects of market volatilities on KraneShares and First 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 KraneShares with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares and First Trust.
Diversification Opportunities for KraneShares and First Trust
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between KraneShares and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares and First Trust Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Emerging and KraneShares 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 are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Emerging has no effect on the direction of KraneShares i.e., KraneShares and First Trust go up and down completely randomly.
Pair Corralation between KraneShares and First Trust
Given the investment horizon of 90 days KraneShares is expected to generate 1.17 times less return on investment than First Trust. In addition to that, KraneShares is 3.2 times more volatile than First Trust Emerging. It trades about 0.0 of its total potential returns per unit of risk. First Trust Emerging is currently generating about 0.01 per unit of volatility. If you would invest 2,674 in First Trust Emerging on September 4, 2024 and sell it today you would earn a total of 21.00 from holding First Trust Emerging or generate 0.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 80.97% |
| Values | Daily Returns |
KraneShares vs. First Trust Emerging
Performance |
| Timeline |
| KraneShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
| First Trust Emerging |
KraneShares and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KraneShares and First Trust
The main advantage of trading using opposite KraneShares and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KraneShares position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.| KraneShares vs. KraneShares SSE STAR | KraneShares vs. KraneShares MSCI China | KraneShares vs. KraneShares MSCI All |
| First Trust vs. First Trust SSI | First Trust vs. First Trust BuyWrite | First Trust vs. First Trust Managed | First Trust vs. First Trust Tactical |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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