Correlation Between SmartETFs Asia and First Trust
Can any of the company-specific risk be diversified away by investing in both SmartETFs Asia and First Trust 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 First Trust 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 First Trust Asia, you can compare the effects of market volatilities on SmartETFs Asia and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartETFs Asia and First Trust.
Diversification Opportunities for SmartETFs Asia and First Trust
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SmartETFs and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Asia Pacific and First Trust Asia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Asia 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Asia has no effect on the direction of SmartETFs Asia i.e., SmartETFs Asia and First Trust go up and down completely randomly.
Pair Corralation between SmartETFs Asia and First Trust
Given the investment horizon of 90 days SmartETFs Asia Pacific is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, SmartETFs Asia Pacific is 1.02 times less risky than First Trust. The etf trades about -0.11 of its potential returns per unit of risk. The First Trust Asia is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,947 in First Trust Asia on August 24, 2024 and sell it today you would earn a total of 30.00 from holding First Trust Asia or generate 1.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SmartETFs Asia Pacific vs. First Trust Asia
Performance |
| Timeline |
| SmartETFs Asia Pacific |
| First Trust Asia |
SmartETFs Asia and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SmartETFs Asia and First Trust
The main advantage of trading using opposite SmartETFs Asia and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartETFs Asia position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| SmartETFs Asia vs. Matthews China Active | SmartETFs Asia vs. MAYBANK EMERGING ETF | SmartETFs Asia vs. Matthews Emerging Markets | SmartETFs Asia vs. JP Morgan Exchange Traded |
| First Trust vs. First Trust Japan | First Trust vs. First Trust Latin | First Trust vs. First Trust United | First Trust vs. First Trust Germany |
Check out your portfolio center.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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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