Correlation Between IShares MSCI and UBS AG

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

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

Diversification Opportunities for IShares MSCI and UBS AG

-0.26

Correlation Coefficient

IShares MSCI  UBS AG

Very good diversification

The 3 months correlation between IShares and UBS is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI China and UBS AG London in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS AG London and IShares MSCI 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 MSCI China are associated (or correlated) with UBS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS AG London has no effect on the direction of IShares MSCI i.e., IShares MSCI and UBS AG go up and down completely randomly.

Pair Corralation between IShares MSCI and UBS AG

Given the investment horizon of 90 days IShares MSCI is expected to generate 8.84 times less return on investment than UBS AG. But when comparing it to its historical volatility, iShares MSCI China is 1.04 times less risky than UBS AG. It trades about 0.01 of its potential returns per unit of risk. UBS AG London is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,654  in UBS AG London on September 22, 2024 and sell it today you would earn a total of  3,059  from holding UBS AG London or generate 115.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

iShares MSCI China  vs.  UBS AG London

iShares MSCI China

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI China are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, IShares MSCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

UBS AG London

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UBS AG London are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, UBS AG disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares MSCI and UBS AG

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

The idea behind iShares MSCI China and UBS AG London 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.