Correlation Between Vanguard FTSE and KraneShares MSCI
Can any of the company-specific risk be diversified away by investing in both Vanguard FTSE and KraneShares MSCI 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 Vanguard FTSE and KraneShares MSCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vanguard FTSE Emerging and KraneShares MSCI Emerging, you can compare the effects of market volatilities on Vanguard FTSE and KraneShares MSCI 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 Vanguard FTSE with a short position of KraneShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard FTSE and KraneShares MSCI.
Diversification Opportunities for Vanguard FTSE and KraneShares MSCI
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Vanguard and KraneShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Emerging and KraneShares MSCI Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI Emerging and Vanguard FTSE 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 Vanguard FTSE Emerging are associated (or correlated) with KraneShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares MSCI Emerging has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and KraneShares MSCI go up and down completely randomly.
Pair Corralation between Vanguard FTSE and KraneShares MSCI
Considering the 90-day investment horizon Vanguard FTSE Emerging is expected to under-perform the KraneShares MSCI. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Emerging is 1.11 times less risky than KraneShares MSCI. The etf trades about -0.13 of its potential returns per unit of risk. The KraneShares MSCI Emerging is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,826 in KraneShares MSCI Emerging on October 23, 2024 and sell it today you would lose (10.00) from holding KraneShares MSCI Emerging or give up 0.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vanguard FTSE Emerging vs. KraneShares MSCI Emerging
Performance |
| Timeline |
| Vanguard FTSE Emerging |
| KraneShares MSCI Emerging |
Vanguard FTSE and KraneShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vanguard FTSE and KraneShares MSCI
The main advantage of trading using opposite Vanguard FTSE and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE position performs unexpectedly, KraneShares MSCI 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 MSCI will offset losses from the drop in KraneShares MSCI's long position.| Vanguard FTSE vs. Vanguard FTSE Developed | Vanguard FTSE vs. Vanguard Real Estate | Vanguard FTSE vs. Vanguard Small Cap Index | Vanguard FTSE vs. Vanguard Total Stock |
| KraneShares MSCI vs. KraneShares MSCI All | KraneShares MSCI vs. Columbia EM Core | KraneShares MSCI vs. KraneShares Emerging Markets | KraneShares MSCI vs. KraneShares MSCI One |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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