Correlation Between SPDR MSCI and UBS ETF

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

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

Diversification Opportunities for SPDR MSCI and UBS ETF

0.7

Correlation Coefficient

SPDR MSCI  UBS ETF

Poor diversification

The 3 months correlation between SPDR and UBS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI Europe 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 SPDR 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 SPDR MSCI Europe 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 SPDR MSCI i.e., SPDR MSCI and UBS ETF go up and down completely randomly.

Pair Corralation between SPDR MSCI and UBS ETF

Assuming the 90 days trading horizon SPDR MSCI Europe is expected to generate 1.92 times more return on investment than UBS ETF. However, SPDR MSCI is 1.92 times more volatile than UBS ETF MSCI. It trades about 0.18 of its potential returns per unit of risk. UBS ETF MSCI is currently generating about 0.16 per unit of risk. If you would invest  17,400  in SPDR MSCI Europe on December 29, 2024 and sell it today you would earn a total of  2,460  from holding SPDR MSCI Europe or generate 14.14% return on investment over 90 days.

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

SPDR MSCI Europe  vs.  UBS ETF MSCI

SPDR MSCI Europe

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR MSCI Europe are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, SPDR MSCI showed solid returns over the last few months and may actually be approaching a breakup point.

UBS ETF MSCI

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETF MSCI are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UBS ETF may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SPDR MSCI and UBS ETF

The main advantage of trading using opposite SPDR MSCI and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI 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 SPDR MSCI Europe 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.