Correlation Between SmartETFs Asia and VictoryShares WestEnd

Can any of the company-specific risk be diversified away by investing in both SmartETFs Asia and VictoryShares WestEnd 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 VictoryShares WestEnd 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 VictoryShares WestEnd Global, you can compare the effects of market volatilities on SmartETFs Asia and VictoryShares WestEnd 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 VictoryShares WestEnd. Check out your portfolio center. Please also check ongoing floating volatility patterns of SmartETFs Asia and VictoryShares WestEnd.

Diversification Opportunities for SmartETFs Asia and VictoryShares WestEnd

0.57

Correlation Coefficient

SmartETFs Asia  VictoryShares WestEnd

Very weak diversification

The 3 months correlation between SmartETFs and VictoryShares is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding SmartETFs Asia Pacific and VictoryShares WestEnd Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares WestEnd 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 VictoryShares WestEnd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares WestEnd has no effect on the direction of SmartETFs Asia i.e., SmartETFs Asia and VictoryShares WestEnd go up and down completely randomly.

Pair Corralation between SmartETFs Asia and VictoryShares WestEnd

Given the investment horizon of 90 days SmartETFs Asia Pacific is expected to generate 2.14 times more return on investment than VictoryShares WestEnd. However, SmartETFs Asia is 2.14 times more volatile than VictoryShares WestEnd Global. It trades about 0.06 of its potential returns per unit of risk. VictoryShares WestEnd Global is currently generating about 0.13 per unit of risk. If you would invest  1,493  in SmartETFs Asia Pacific on September 4, 2024 and sell it today you would earn a total of  74.00  from holding SmartETFs Asia Pacific or generate 4.96% return on investment over 90 days.

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

SmartETFs Asia Pacific  vs.  VictoryShares WestEnd Global

SmartETFs Asia Pacific

Risk-Adjusted Performance

4 of 100

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.

VictoryShares WestEnd

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VictoryShares WestEnd Global are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, VictoryShares WestEnd is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SmartETFs Asia and VictoryShares WestEnd

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

The idea behind SmartETFs Asia Pacific and VictoryShares WestEnd Global 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.