Correlation Between Swiss Leader and UBS ETF

Can any of the company-specific risk be diversified away by investing in both Swiss Leader 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 Swiss Leader and UBS ETF 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 ETF SXI, you can compare the effects of market volatilities on Swiss Leader 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 Swiss Leader with a short position of UBS ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swiss Leader and UBS ETF.

Diversification Opportunities for Swiss Leader and UBS ETF

-0.38

Correlation Coefficient

Swiss Leader  UBS ETF

Very good diversification

The 3 months correlation between Swiss and UBS is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Swiss Leader Price and UBS ETF SXI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF SXI 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 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 SXI has no effect on the direction of Swiss Leader i.e., Swiss Leader and UBS ETF go up and down completely randomly.

Pair Corralation between Swiss Leader and UBS ETF

Assuming the 90 days trading horizon Swiss Leader Price is expected to under-perform the UBS ETF. In addition to that, Swiss Leader is 1.34 times more volatile than UBS ETF SXI. It trades about -0.02 of its total potential returns per unit of risk. UBS ETF SXI is currently generating about 0.25 per unit of volatility. If you would invest  3,338  in UBS ETF SXI on September 15, 2024 and sell it today you would earn a total of  284.00  from holding UBS ETF SXI or generate 8.51% return on investment over 90 days.

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

Swiss Leader Price  vs.  UBS ETF SXI

Pair Trading with Swiss Leader and UBS ETF

The main advantage of trading using opposite Swiss Leader and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Swiss Leader 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 Swiss Leader Price and UBS ETF SXI 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.