Correlation Between VanEck Semiconductor and KraneShares Trust
Can any of the company-specific risk be diversified away by investing in both VanEck Semiconductor 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 VanEck Semiconductor and KraneShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VanEck Semiconductor ETF and KraneShares Trust, you can compare the effects of market volatilities on VanEck Semiconductor 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 VanEck Semiconductor with a short position of KraneShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of VanEck Semiconductor and KraneShares Trust.
Diversification Opportunities for VanEck Semiconductor and KraneShares Trust
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VanEck and KraneShares is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Semiconductor ETF and KraneShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares Trust and VanEck Semiconductor 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 VanEck Semiconductor ETF 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 VanEck Semiconductor i.e., VanEck Semiconductor and KraneShares Trust go up and down completely randomly.
Pair Corralation between VanEck Semiconductor and KraneShares Trust
Considering the 90-day investment horizon VanEck Semiconductor ETF is expected to under-perform the KraneShares Trust. In addition to that, VanEck Semiconductor is 3.51 times more volatile than KraneShares Trust. It trades about -0.19 of its total potential returns per unit of risk. KraneShares Trust is currently generating about -0.02 per unit of volatility. If you would invest 2,730 in KraneShares Trust on August 30, 2024 and sell it today you would lose (6.00) from holding KraneShares Trust or give up 0.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
VanEck Semiconductor ETF vs. KraneShares Trust
Performance |
| Timeline |
| VanEck Semiconductor ETF |
| KraneShares Trust |
VanEck Semiconductor and KraneShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VanEck Semiconductor and KraneShares Trust
The main advantage of trading using opposite VanEck Semiconductor and KraneShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VanEck Semiconductor 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 VanEck Semiconductor ETF 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.
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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