Correlation Between WisdomTree and UBS Plc

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

By analyzing existing cross correlation between WisdomTree SP 500 and UBS plc , you can compare the effects of market volatilities on WisdomTree and UBS Plc 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 WisdomTree with a short position of UBS Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of WisdomTree and UBS Plc.

Diversification Opportunities for WisdomTree and UBS Plc

0.9

Correlation Coefficient

WisdomTree  UBS Plc

Almost no diversification

The 3 months correlation between WisdomTree and UBS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree SP 500 and UBS plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS plc and WisdomTree 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 WisdomTree SP 500 are associated (or correlated) with UBS Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS plc has no effect on the direction of WisdomTree i.e., WisdomTree and UBS Plc go up and down completely randomly.

Pair Corralation between WisdomTree and UBS Plc

Assuming the 90 days trading horizon WisdomTree SP 500 is expected to generate 2.94 times more return on investment than UBS Plc. However, WisdomTree is 2.94 times more volatile than UBS plc . It trades about 0.23 of its potential returns per unit of risk. UBS plc is currently generating about 0.19 per unit of risk. If you would invest  9,321  in WisdomTree SP 500 on September 8, 2024 and sell it today you would earn a total of  3,262  from holding WisdomTree SP 500 or generate 35.0% return on investment over 90 days.

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

WisdomTree SP 500  vs.  UBS plc

WisdomTree SP 500

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree SP 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, WisdomTree unveiled solid returns over the last few months and may actually be approaching a breakup point.

UBS plc

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, UBS Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WisdomTree and UBS Plc

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

The idea behind WisdomTree SP 500 and UBS plc 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.