Correlation Between UBS ETF and IShares SP

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

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

Diversification Opportunities for UBS ETF and IShares SP

-0.65

Correlation Coefficient

UBS ETF  IShares SP

Excellent diversification

The 3 months correlation between UBS and IShares is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETF MSCI and iShares SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SP 500 and UBS ETF 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 ETF MSCI are associated (or correlated) with IShares SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SP 500 has no effect on the direction of UBS ETF i.e., UBS ETF and IShares SP go up and down completely randomly.

Pair Corralation between UBS ETF and IShares SP

Assuming the 90 days trading horizon UBS ETF MSCI is expected to under-perform the IShares SP. In addition to that, UBS ETF is 1.18 times more volatile than iShares SP 500. It trades about -0.05 of its total potential returns per unit of risk. iShares SP 500 is currently generating about 0.21 per unit of volatility. If you would invest  5,581  in iShares SP 500 on September 14, 2024 and sell it today you would earn a total of  467.00  from holding iShares SP 500 or generate 8.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

UBS ETF MSCI  vs.  iShares SP 500

UBS ETF MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS ETF MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UBS ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares SP 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UBS ETF and IShares SP

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

The idea behind UBS ETF MSCI and iShares SP 500 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.