Correlation Between UBS AG and VanEck BDC

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

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

Diversification Opportunities for UBS AG and VanEck BDC

0.81

Correlation Coefficient

UBS AG  VanEck BDC

Very poor diversification

The 3 months correlation between UBS and VanEck is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and VanEck BDC Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck BDC Income and UBS AG 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 UBS AG London are associated (or correlated) with VanEck BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck BDC Income has no effect on the direction of UBS AG i.e., UBS AG and VanEck BDC go up and down completely randomly.

Pair Corralation between UBS AG and VanEck BDC

Given the investment horizon of 90 days UBS AG London is expected to generate 1.44 times more return on investment than VanEck BDC. However, UBS AG is 1.44 times more volatile than VanEck BDC Income. It trades about 0.62 of its potential returns per unit of risk. VanEck BDC Income is currently generating about 0.34 per unit of risk. If you would invest  2,467  in UBS AG London on October 26, 2024 and sell it today you would earn a total of  257.00  from holding UBS AG London or generate 10.42% return on investment over 90 days.

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

UBS AG London  vs.  VanEck BDC Income

UBS AG London

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UBS AG London are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, UBS AG sustained solid returns over the last few months and may actually be approaching a breakup point.

VanEck BDC Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck BDC Income are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, VanEck BDC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UBS AG and VanEck BDC

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

The idea behind UBS AG London and VanEck BDC Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.