Correlation Between IShares Asia and UBS ETF

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

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

Diversification Opportunities for IShares Asia and UBS ETF

0.8

Correlation Coefficient

IShares Asia  UBS ETF

Very poor diversification

The 3 months correlation between IShares and UBS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Asia Pacific 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 IShares Asia 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 Asia Pacific 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 IShares Asia i.e., IShares Asia and UBS ETF go up and down completely randomly.

Pair Corralation between IShares Asia and UBS ETF

Assuming the 90 days trading horizon iShares Asia Pacific is expected to under-perform the UBS ETF. In addition to that, IShares Asia is 1.51 times more volatile than UBS ETF MSCI. It trades about -0.23 of its total potential returns per unit of risk. UBS ETF MSCI is currently generating about -0.1 per unit of volatility. If you would invest  2,002  in UBS ETF MSCI on October 7, 2024 and sell it today you would lose (22.00) from holding UBS ETF MSCI or give up 1.1% of portfolio value over 90 days.

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

iShares Asia Pacific  vs.  UBS ETF MSCI

iShares Asia Pacific

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Asia Pacific has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund 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 IShares Asia and UBS ETF

The main advantage of trading using opposite IShares Asia and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Asia 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 iShares Asia Pacific 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.