Correlation Between IShares Govt and UBS Fund

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

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

Diversification Opportunities for IShares Govt and UBS Fund

0.55

Correlation Coefficient

IShares Govt  UBS Fund

Very weak diversification

The 3 months correlation between IShares and UBS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding iShares Govt Bond 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 IShares Govt 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 iShares Govt Bond 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 IShares Govt i.e., IShares Govt and UBS Fund go up and down completely randomly.

Pair Corralation between IShares Govt and UBS Fund

Assuming the 90 days trading horizon iShares Govt Bond is expected to under-perform the UBS Fund. But the etf apears to be less risky and, when comparing its historical volatility, iShares Govt Bond is 1.73 times less risky than UBS Fund. The etf trades about -0.07 of its potential returns per unit of risk. The UBS Fund Solutions is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,160  in UBS Fund Solutions on December 30, 2024 and sell it today you would lose (49.00) from holding UBS Fund Solutions or give up 0.95% of portfolio value over 90 days.

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

iShares Govt Bond  vs.  UBS Fund Solutions

iShares Govt Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

UBS Fund Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS Fund Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, UBS Fund is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with IShares Govt and UBS Fund

The main advantage of trading using opposite IShares Govt and UBS Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Govt 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 iShares Govt Bond 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.