Correlation Between VictoryShares WestEnd and SmartETFs Asia

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

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

Diversification Opportunities for VictoryShares WestEnd and SmartETFs Asia

0.77

Correlation Coefficient

VictoryShares WestEnd  SmartETFs Asia

Poor diversification

The 3 months correlation between VictoryShares and SmartETFs is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares WestEnd Global 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 VictoryShares WestEnd 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 VictoryShares WestEnd Global 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 VictoryShares WestEnd i.e., VictoryShares WestEnd and SmartETFs Asia go up and down completely randomly.

Pair Corralation between VictoryShares WestEnd and SmartETFs Asia

Given the investment horizon of 90 days VictoryShares WestEnd is expected to generate 70.14 times less return on investment than SmartETFs Asia. But when comparing it to its historical volatility, VictoryShares WestEnd Global is 1.15 times less risky than SmartETFs Asia. It trades about 0.0 of its potential returns per unit of risk. SmartETFs Asia Pacific is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,524  in SmartETFs Asia Pacific on December 2, 2024 and sell it today you would earn a total of  43.00  from holding SmartETFs Asia Pacific or generate 2.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.72%
Values	Daily Returns

VictoryShares WestEnd Global  vs.  SmartETFs Asia Pacific

VictoryShares WestEnd

Risk-Adjusted Performance

Very Weak

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

SmartETFs Asia Pacific

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Asia Pacific are ranked lower than 4 (%) 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.

Pair Trading with VictoryShares WestEnd and SmartETFs Asia

The main advantage of trading using opposite VictoryShares WestEnd and SmartETFs Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VictoryShares WestEnd 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 VictoryShares WestEnd Global 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.