Correlation Between Innovator and KraneShares Trust
Can any of the company-specific risk be diversified away by investing in both Innovator 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 Innovator and KraneShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Innovator SP 500 and KraneShares Trust, you can compare the effects of market volatilities on Innovator 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 Innovator with a short position of KraneShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Innovator and KraneShares Trust.
Diversification Opportunities for Innovator and KraneShares Trust
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Innovator and KraneShares is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Innovator SP 500 and KraneShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Trust and Innovator 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 Innovator SP 500 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 Innovator i.e., Innovator and KraneShares Trust go up and down completely randomly.
Pair Corralation between Innovator and KraneShares Trust
Given the investment horizon of 90 days Innovator SP 500 is expected to generate 0.35 times more return on investment than KraneShares Trust. However, Innovator SP 500 is 2.86 times less risky than KraneShares Trust. It trades about 0.26 of its potential returns per unit of risk. KraneShares Trust is currently generating about -0.08 per unit of risk. If you would invest 4,151 in Innovator SP 500 on August 26, 2024 and sell it today you would earn a total of 40.00 from holding Innovator SP 500 or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Innovator SP 500 vs. KraneShares Trust
Performance |
| Timeline |
| Innovator SP 500 |
| KraneShares Trust |
Innovator and KraneShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Innovator and KraneShares Trust
The main advantage of trading using opposite Innovator and KraneShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Innovator 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.The idea behind Innovator SP 500 and KraneShares Trust 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 Trust vs. iShares Dividend and | KraneShares Trust vs. Martin Currie Sustainable | KraneShares Trust vs. VictoryShares THB Mid | KraneShares Trust vs. Mast Global Battery |
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 CEOs Directory module to screen CEOs from public companies around the world.
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