Correlation Between NYSE Composite and KraneShares CSI
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and KraneShares CSI 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 NYSE Composite and KraneShares CSI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and KraneShares CSI China, you can compare the effects of market volatilities on NYSE Composite and KraneShares CSI 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 NYSE Composite with a short position of KraneShares CSI. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and KraneShares CSI.
Diversification Opportunities for NYSE Composite and KraneShares CSI
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NYSE and KraneShares is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and KraneShares CSI China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares CSI China and NYSE Composite 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 NYSE Composite are associated (or correlated) with KraneShares CSI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares CSI China has no effect on the direction of NYSE Composite i.e., NYSE Composite and KraneShares CSI go up and down completely randomly.
Pair Corralation between NYSE Composite and KraneShares CSI
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.63 times less return on investment than KraneShares CSI. But when comparing it to its historical volatility, NYSE Composite is 5.42 times less risky than KraneShares CSI. It trades about 0.14 of its potential returns per unit of risk. KraneShares CSI China is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,535 in KraneShares CSI China on August 29, 2024 and sell it today you would earn a total of 459.00 from holding KraneShares CSI China or generate 18.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. KraneShares CSI China
Performance |
| Timeline |
NYSE Composite and KraneShares CSI Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
KraneShares CSI China
Pair trading matchups for KraneShares CSI
Pair Trading with NYSE Composite and KraneShares CSI
The main advantage of trading using opposite NYSE Composite and KraneShares CSI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, KraneShares CSI 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 CSI will offset losses from the drop in KraneShares CSI's long position.| NYSE Composite vs. Sphere Entertainment Co | NYSE Composite vs. Weibo Corp | NYSE Composite vs. BCE Inc | NYSE Composite vs. Pinterest |
| KraneShares CSI vs. iShares MSCI China | KraneShares CSI vs. Invesco China Technology | KraneShares CSI vs. Xtrackers Harvest CSI | KraneShares CSI vs. iShares China Large Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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