Correlation Between UBS AG and VanEck Energy

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

By analyzing existing cross correlation between UBS AG London and VanEck Energy Income, you can compare the effects of market volatilities on UBS AG and VanEck Energy 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 AG with a short position of VanEck Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS AG and VanEck Energy.

Diversification Opportunities for UBS AG and VanEck Energy

0.87

Correlation Coefficient

UBS AG  VanEck Energy

Very poor diversification

The 3 months correlation between UBS and VanEck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and VanEck Energy Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Energy Income and UBS AG 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 AG London are associated (or correlated) with VanEck Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Energy Income has no effect on the direction of UBS AG i.e., UBS AG and VanEck Energy go up and down completely randomly.

Pair Corralation between UBS AG and VanEck Energy

Given the investment horizon of 90 days UBS AG is expected to generate 2.09 times less return on investment than VanEck Energy. But when comparing it to its historical volatility, UBS AG London is 1.22 times less risky than VanEck Energy. It trades about 0.12 of its potential returns per unit of risk. VanEck Energy Income is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,349  in VanEck Energy Income on September 13, 2024 and sell it today you would earn a total of  1,205  from holding VanEck Energy Income or generate 14.43% return on investment over 90 days.

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

UBS AG London  vs.  VanEck Energy Income

UBS AG London

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS AG London are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UBS AG may actually be approaching a critical reversion point that can send shares even higher in January 2025.

VanEck Energy Income

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Energy Income are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, VanEck Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS AG and VanEck Energy

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

The idea behind UBS AG London and VanEck Energy Income 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.