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

0.98

Correlation Coefficient

SmartETFs Asia  First Trust

Almost no diversification

The 3 months correlation between SmartETFs and First is 0.98. 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 is expected to generate 1.36 times less return on investment than First Trust. But when comparing it to its historical volatility, SmartETFs Asia Pacific is 1.95 times less risky than First Trust. It trades about 0.3 of its potential returns per unit of risk. First Trust Asia is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,053  in First Trust Asia on May 3, 2025 and sell it today you would earn a total of  523.00  from holding First Trust Asia or generate 17.13% return on investment over 90 days.

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

SmartETFs Asia Pacific  vs.  First Trust Asia

SmartETFs Asia Pacific

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SmartETFs Asia Pacific are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, SmartETFs Asia may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Trust Asia

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Asia are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

The idea behind SmartETFs Asia Pacific and First Trust Asia 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.