Correlation Between KraneShares MSCI and ProShares Short

Can any of the company-specific risk be diversified away by investing in both KraneShares MSCI and ProShares Short 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 ProShares Short 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 ProShares Short QQQ, you can compare the effects of market volatilities on KraneShares MSCI and ProShares Short 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 ProShares Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of KraneShares MSCI and ProShares Short.

Diversification Opportunities for KraneShares MSCI and ProShares Short

-0.72

Correlation Coefficient

KraneShares MSCI  ProShares Short

Pay attention - limited upside

The 3 months correlation between KraneShares and ProShares is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding KraneShares MSCI China and ProShares Short QQQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Short QQQ 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 ProShares Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Short QQQ has no effect on the direction of KraneShares MSCI i.e., KraneShares MSCI and ProShares Short go up and down completely randomly.

Pair Corralation between KraneShares MSCI and ProShares Short

Given the investment horizon of 90 days KraneShares MSCI China is expected to generate 1.39 times more return on investment than ProShares Short. However, KraneShares MSCI is 1.39 times more volatile than ProShares Short QQQ. It trades about 0.07 of its potential returns per unit of risk. ProShares Short QQQ is currently generating about -0.2 per unit of risk. If you would invest  2,565  in KraneShares MSCI China on May 5, 2025 and sell it today you would earn a total of  132.00  from holding KraneShares MSCI China or generate 5.15% return on investment over 90 days.

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

KraneShares MSCI China  vs.  ProShares Short QQQ

KraneShares MSCI China

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, KraneShares MSCI is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ProShares Short QQQ

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Short QQQ has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Etf's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with KraneShares MSCI and ProShares Short

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

The idea behind KraneShares MSCI China and ProShares Short QQQ 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.