Correlation Between KraneShares MSCI and Formidable ETF

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

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

Diversification Opportunities for KraneShares MSCI and Formidable ETF

0.8

Correlation Coefficient

KraneShares MSCI  Formidable ETF

Very poor diversification

The 3 months correlation between KraneShares and Formidable is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI China and Formidable ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formidable ETF and KraneShares MSCI 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 MSCI China are associated (or correlated) with Formidable ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formidable ETF has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and Formidable ETF go up and down completely randomly.

Pair Corralation between KraneShares MSCI and Formidable ETF

Given the investment horizon of 90 days KraneShares MSCI is expected to generate 1.43 times less return on investment than Formidable ETF. In addition to that, KraneShares MSCI is 1.7 times more volatile than Formidable ETF. It trades about 0.09 of its total potential returns per unit of risk. Formidable ETF is currently generating about 0.22 per unit of volatility. If you would invest  2,117  in Formidable ETF on May 2, 2025 and sell it today you would earn a total of  215.00  from holding Formidable ETF or generate 10.16% return on investment over 90 days.

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

KraneShares MSCI China  vs.  Formidable ETF

KraneShares MSCI China

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, KraneShares MSCI may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Formidable ETF

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Formidable ETF are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Formidable ETF may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with KraneShares MSCI and Formidable ETF

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

The idea behind KraneShares MSCI China and Formidable ETF 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.