Correlation Between UBS 100 and UBS Institutional

Can any of the company-specific risk be diversified away by investing in both UBS 100 and UBS Institutional 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 UBS 100 and UBS Institutional into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UBS 100 Index Fund and UBS Institutional, you can compare the effects of market volatilities on UBS 100 and UBS Institutional 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 UBS 100 with a short position of UBS Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS 100 and UBS Institutional.

Diversification Opportunities for UBS 100 and UBS Institutional

-0.75

Correlation Coefficient

UBS 100  UBS Institutional

Pay attention - limited upside

The 3 months correlation between UBS and UBS is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding UBS 100 Index Fund and UBS Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Institutional and UBS 100 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 UBS 100 Index Fund are associated (or correlated) with UBS Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Institutional has no effect on the direction of UBS 100 i.e., UBS 100 and UBS Institutional go up and down completely randomly.

Pair Corralation between UBS 100 and UBS Institutional

Assuming the 90 days trading horizon UBS 100 Index Fund is expected to under-perform the UBS Institutional. But the fund apears to be less risky and, when comparing its historical volatility, UBS 100 Index Fund is 1.28 times less risky than UBS Institutional. The fund trades about -0.14 of its potential returns per unit of risk. The UBS Institutional is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  269,791  in UBS Institutional on October 7, 2024 and sell it today you would lose (533.00) from holding UBS Institutional or give up 0.2% of portfolio value over 90 days.

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

UBS 100 Index Fund  vs.  UBS Institutional

UBS 100 Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS 100 Index Fund has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, UBS 100 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

UBS Institutional

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days UBS Institutional has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly abnormal forward indicators, UBS Institutional may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UBS 100 and UBS Institutional

The main advantage of trading using opposite UBS 100 and UBS Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS 100 position performs unexpectedly, UBS Institutional 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 UBS Institutional will offset losses from the drop in UBS Institutional's long position.

The idea behind UBS 100 Index Fund and UBS Institutional 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.