Correlation Between SPDR FTSE and UBS ETF

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

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

Diversification Opportunities for SPDR FTSE and UBS ETF

0.33

Correlation Coefficient

SPDR FTSE  UBS ETF

Weak diversification

The 3 months correlation between SPDR and UBS is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SPDR FTSE UK and UBS ETF MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF MSCI and SPDR FTSE 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 SPDR FTSE UK are associated (or correlated) with UBS ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETF MSCI has no effect on the direction of SPDR FTSE i.e., SPDR FTSE and UBS ETF go up and down completely randomly.

Pair Corralation between SPDR FTSE and UBS ETF

Assuming the 90 days trading horizon SPDR FTSE UK is expected to generate 0.97 times more return on investment than UBS ETF. However, SPDR FTSE UK is 1.03 times less risky than UBS ETF. It trades about 0.04 of its potential returns per unit of risk. UBS ETF MSCI is currently generating about 0.01 per unit of risk. If you would invest  610.00  in SPDR FTSE UK on October 24, 2024 and sell it today you would earn a total of  10.00  from holding SPDR FTSE UK or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

SPDR FTSE UK  vs.  UBS ETF MSCI

SPDR FTSE UK

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR FTSE UK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR FTSE is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with SPDR FTSE and UBS ETF

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

The idea behind SPDR FTSE UK and UBS ETF MSCI 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.