Correlation Between AAM SP and KraneShares

Can any of the company-specific risk be diversified away by investing in both AAM SP and KraneShares 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 AAM SP and KraneShares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AAM SP 500 and KraneShares, you can compare the effects of market volatilities on AAM SP and KraneShares 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 AAM SP with a short position of KraneShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAM SP and KraneShares.

Diversification Opportunities for AAM SP and KraneShares

0.13

Correlation Coefficient

AAM SP  KraneShares

Average diversification

The 3 months correlation between AAM and KraneShares is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding AAM SP 500 and KraneShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares and AAM SP 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 AAM SP 500 are associated (or correlated) with KraneShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KraneShares has no effect on the direction of AAM SP i.e., AAM SP and KraneShares go up and down completely randomly.

Pair Corralation between AAM SP and KraneShares

If you would invest (100.00) in KraneShares on March 8, 2024 and sell it today you would earn a total of  100.00  from holding KraneShares or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

AAM SP 500  vs.  KraneShares

AAM SP 500

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AAM SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, AAM SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

KraneShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KraneShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, KraneShares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with AAM SP and KraneShares

The main advantage of trading using opposite AAM SP and KraneShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAM SP position performs unexpectedly, KraneShares 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 will offset losses from the drop in KraneShares' long position.

The idea behind AAM SP 500 and KraneShares 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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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.