Correlation Between WisdomTree Emerging and KraneShares MSCI

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

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

Diversification Opportunities for WisdomTree Emerging and KraneShares MSCI

0.86

Correlation Coefficient

WisdomTree Emerging  KraneShares MSCI

Very poor diversification

The 3 months correlation between WisdomTree and KraneShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Emerging Markets and KraneShares MSCI All in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KraneShares MSCI All and WisdomTree 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 WisdomTree Emerging Markets 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 All has no effect on the direction of WisdomTree Emerging i.e., WisdomTree Emerging and KraneShares MSCI go up and down completely randomly.

Pair Corralation between WisdomTree Emerging and KraneShares MSCI

Given the investment horizon of 90 days WisdomTree Emerging is expected to generate 3.13 times less return on investment than KraneShares MSCI. But when comparing it to its historical volatility, WisdomTree Emerging Markets is 1.91 times less risky than KraneShares MSCI. It trades about 0.15 of its potential returns per unit of risk. KraneShares MSCI All is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,572  in KraneShares MSCI All on May 4, 2025 and sell it today you would earn a total of  368.00  from holding KraneShares MSCI All or generate 23.41% return on investment over 90 days.

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

WisdomTree Emerging Markets  vs.  KraneShares MSCI All

WisdomTree Emerging

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Emerging Markets are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, WisdomTree Emerging may actually be approaching a critical reversion point that can send shares even higher in September 2025.

KraneShares MSCI All

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KraneShares MSCI All are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, KraneShares MSCI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WisdomTree Emerging and KraneShares MSCI

The main advantage of trading using opposite WisdomTree Emerging and KraneShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Emerging 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.

The idea behind WisdomTree Emerging Markets and KraneShares MSCI All 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.