Correlation Between Swiss Leader and UBS PF

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

By analyzing existing cross correlation between Swiss Leader Price and UBS PF Swiss, you can compare the effects of market volatilities on Swiss Leader and UBS PF 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 Swiss Leader with a short position of UBS PF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Leader and UBS PF.

Diversification Opportunities for Swiss Leader and UBS PF

-0.52

Correlation Coefficient

Swiss Leader  UBS PF

Excellent diversification

The 3 months correlation between Swiss and UBS is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and UBS PF Swiss in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS PF Swiss and Swiss Leader 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 Swiss Leader Price are associated (or correlated) with UBS PF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS PF Swiss has no effect on the direction of Swiss Leader i.e., Swiss Leader and UBS PF go up and down completely randomly.

Pair Corralation between Swiss Leader and UBS PF

Assuming the 90 days trading horizon Swiss Leader is expected to generate 2.04 times less return on investment than UBS PF. But when comparing it to its historical volatility, Swiss Leader Price is 1.42 times less risky than UBS PF. It trades about 0.03 of its potential returns per unit of risk. UBS PF Swiss is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  12,851  in UBS PF Swiss on October 9, 2024 and sell it today you would earn a total of  2,609  from holding UBS PF Swiss or generate 20.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Swiss Leader Price  vs.  UBS PF Swiss

Pair Trading with Swiss Leader and UBS PF

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

The idea behind Swiss Leader Price and UBS PF Swiss 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.