Correlation Between VanEck Defense and UBS Fund

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

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

Diversification Opportunities for VanEck Defense and UBS Fund

0.31

Correlation Coefficient

VanEck Defense  UBS Fund

Weak diversification

The 3 months correlation between VanEck and UBS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding VanEck Defense ETF and UBS Fund Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Fund Solutions and VanEck Defense 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 VanEck Defense ETF are associated (or correlated) with UBS Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Fund Solutions has no effect on the direction of VanEck Defense i.e., VanEck Defense and UBS Fund go up and down completely randomly.

Pair Corralation between VanEck Defense and UBS Fund

Assuming the 90 days trading horizon VanEck Defense ETF is expected to generate 1.03 times more return on investment than UBS Fund. However, VanEck Defense is 1.03 times more volatile than UBS Fund Solutions. It trades about 0.15 of its potential returns per unit of risk. UBS Fund Solutions is currently generating about 0.06 per unit of risk. If you would invest  2,269  in VanEck Defense ETF on September 23, 2024 and sell it today you would earn a total of  1,191  from holding VanEck Defense ETF or generate 52.49% return on investment over 90 days.

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

VanEck Defense ETF  vs.  UBS Fund Solutions

VanEck Defense ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UBS Fund Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Fund Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, UBS Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VanEck Defense and UBS Fund

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

The idea behind VanEck Defense ETF and UBS Fund Solutions 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.