Correlation Between ETF Series and SmartETFs Asia

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

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

Diversification Opportunities for ETF Series and SmartETFs Asia

0.66

Correlation Coefficient

ETF Series  SmartETFs Asia

Poor diversification

The 3 months correlation between ETF and SmartETFs is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions and SmartETFs Asia Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SmartETFs Asia Pacific and ETF Series 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 ETF Series Solutions are associated (or correlated) with SmartETFs Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SmartETFs Asia Pacific has no effect on the direction of ETF Series i.e., ETF Series and SmartETFs Asia go up and down completely randomly.

Pair Corralation between ETF Series and SmartETFs Asia

Given the investment horizon of 90 days ETF Series Solutions is expected to under-perform the SmartETFs Asia. But the etf apears to be less risky and, when comparing its historical volatility, ETF Series Solutions is 1.2 times less risky than SmartETFs Asia. The etf trades about -0.04 of its potential returns per unit of risk. The SmartETFs Asia Pacific is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,557  in SmartETFs Asia Pacific on October 24, 2024 and sell it today you would lose (4.00) from holding SmartETFs Asia Pacific or give up 0.26% of portfolio value over 90 days.

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

ETF Series Solutions  vs.  SmartETFs Asia Pacific

ETF Series Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ETF Series Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ETF Series is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SmartETFs Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartETFs Asia Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, SmartETFs Asia is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with ETF Series and SmartETFs Asia

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

The idea behind ETF Series Solutions and SmartETFs Asia Pacific 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.