Correlation Between KraneShares Emerging and IShares MSCI

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

By analyzing existing cross correlation between KraneShares Emerging Markets and iShares MSCI EAFE, you can compare the effects of market volatilities on KraneShares Emerging and IShares 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 KraneShares Emerging with a short position of IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares Emerging and IShares MSCI.

Diversification Opportunities for KraneShares Emerging and IShares MSCI

0.95

Correlation Coefficient

KraneShares Emerging  IShares MSCI

Almost no diversification

The 3 months correlation between KraneShares and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares Emerging Markets and iShares MSCI EAFE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI EAFE and KraneShares Emerging 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 KraneShares Emerging Markets are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI EAFE has no effect on the direction of KraneShares Emerging i.e., KraneShares Emerging and IShares MSCI go up and down completely randomly.

Pair Corralation between KraneShares Emerging and IShares MSCI

Given the investment horizon of 90 days KraneShares Emerging Markets is expected to generate 1.77 times more return on investment than IShares MSCI. However, KraneShares Emerging is 1.77 times more volatile than iShares MSCI EAFE. It trades about 0.16 of its potential returns per unit of risk. iShares MSCI EAFE is currently generating about 0.22 per unit of risk. If you would invest  1,952  in KraneShares Emerging Markets on May 6, 2025 and sell it today you would earn a total of  248.00  from holding KraneShares Emerging Markets or generate 12.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

KraneShares Emerging Markets  vs.  iShares MSCI EAFE

KraneShares Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares Emerging Markets are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, KraneShares Emerging reported solid returns over the last few months and may actually be approaching a breakup point.

iShares MSCI EAFE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI EAFE are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, IShares MSCI may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with KraneShares Emerging and IShares MSCI

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

The idea behind KraneShares Emerging Markets and iShares MSCI EAFE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.