Correlation Between MicroSectors Gold and UBS ETRACS

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

By analyzing existing cross correlation between MicroSectors Gold 3X and UBS ETRACS , you can compare the effects of market volatilities on MicroSectors Gold and UBS ETRACS 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 MicroSectors Gold with a short position of UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and UBS ETRACS.

Diversification Opportunities for MicroSectors Gold and UBS ETRACS

0.14

Correlation Coefficient

MicroSectors Gold  UBS ETRACS

Average diversification

The 3 months correlation between MicroSectors and UBS is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold 3X and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and MicroSectors Gold 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 MicroSectors Gold 3X are associated (or correlated) with UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and UBS ETRACS go up and down completely randomly.

Pair Corralation between MicroSectors Gold and UBS ETRACS

Given the investment horizon of 90 days MicroSectors Gold 3X is expected to under-perform the UBS ETRACS. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectors Gold 3X is 1.27 times less risky than UBS ETRACS. The etf trades about -0.07 of its potential returns per unit of risk. The UBS ETRACS is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,117  in UBS ETRACS on September 12, 2024 and sell it today you would lose (295.00) from holding UBS ETRACS or give up 13.93% of portfolio value over 90 days.

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

MicroSectors Gold 3X  vs.  UBS ETRACS

MicroSectors Gold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MicroSectors Gold 3X has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Etf's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

UBS ETRACS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS ETRACS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with MicroSectors Gold and UBS ETRACS

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

The idea behind MicroSectors Gold 3X and UBS ETRACS 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.