Correlation Between SmartETFs Asia and IShares Global

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

By analyzing existing cross correlation between SmartETFs Asia Pacific and iShares Global 100, you can compare the effects of market volatilities on SmartETFs Asia and IShares Global 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 SmartETFs Asia with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartETFs Asia and IShares Global.

Diversification Opportunities for SmartETFs Asia and IShares Global

0.1

Correlation Coefficient

SmartETFs Asia  IShares Global

Average diversification

The 3 months correlation between SmartETFs and IShares is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Asia Pacific and iShares Global 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global 100 and SmartETFs Asia 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 SmartETFs Asia Pacific are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global 100 has no effect on the direction of SmartETFs Asia i.e., SmartETFs Asia and IShares Global go up and down completely randomly.

Pair Corralation between SmartETFs Asia and IShares Global

Given the investment horizon of 90 days SmartETFs Asia Pacific is expected to generate 0.84 times more return on investment than IShares Global. However, SmartETFs Asia Pacific is 1.19 times less risky than IShares Global. It trades about 0.02 of its potential returns per unit of risk. iShares Global 100 is currently generating about -0.07 per unit of risk. If you would invest  1,537  in SmartETFs Asia Pacific on December 29, 2024 and sell it today you would earn a total of  13.00  from holding SmartETFs Asia Pacific or generate 0.85% return on investment over 90 days.

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

SmartETFs Asia Pacific  vs.  iShares Global 100

SmartETFs Asia Pacific

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Asia Pacific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, SmartETFs Asia is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Global 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SmartETFs Asia and IShares Global

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

The idea behind SmartETFs Asia Pacific and iShares Global 100 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.