Correlation Between UBS Plc and SSgA SPDR

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

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

Diversification Opportunities for UBS Plc and SSgA SPDR

0.92

Correlation Coefficient

UBS Plc  SSgA SPDR

Almost no diversification

The 3 months correlation between UBS and SSgA is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding UBS plc and SSgA SPDR ETFs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSgA SPDR ETFs and UBS Plc 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 plc are associated (or correlated) with SSgA SPDR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSgA SPDR ETFs has no effect on the direction of UBS Plc i.e., UBS Plc and SSgA SPDR go up and down completely randomly.

Pair Corralation between UBS Plc and SSgA SPDR

Assuming the 90 days trading horizon UBS plc is expected to generate 1.9 times more return on investment than SSgA SPDR. However, UBS Plc is 1.9 times more volatile than SSgA SPDR ETFs. It trades about 0.16 of its potential returns per unit of risk. SSgA SPDR ETFs is currently generating about 0.2 per unit of risk. If you would invest  8,549  in UBS plc on October 10, 2024 and sell it today you would earn a total of  727.00  from holding UBS plc or generate 8.5% return on investment over 90 days.

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

UBS plc   vs.  SSgA SPDR ETFs

UBS plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UBS Plc may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SSgA SPDR ETFs

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SSgA SPDR ETFs are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, SSgA SPDR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UBS Plc and SSgA SPDR

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

The idea behind UBS plc and SSgA SPDR ETFs 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.