Correlation Between UBS Barclays and UBS ETF

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

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

Diversification Opportunities for UBS Barclays and UBS ETF

0.53

Correlation Coefficient

UBS Barclays  UBS ETF

Very weak diversification

The 3 months correlation between UBS and UBS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding UBS Barclays Liquid and UBS ETF Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF Public and UBS Barclays 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 Barclays Liquid 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 Public has no effect on the direction of UBS Barclays i.e., UBS Barclays and UBS ETF go up and down completely randomly.

Pair Corralation between UBS Barclays and UBS ETF

Assuming the 90 days trading horizon UBS Barclays Liquid is expected to under-perform the UBS ETF. In addition to that, UBS Barclays is 2.43 times more volatile than UBS ETF Public. It trades about -0.04 of its total potential returns per unit of risk. UBS ETF Public is currently generating about -0.04 per unit of volatility. If you would invest  1,050  in UBS ETF Public on December 29, 2024 and sell it today you would lose (7.00) from holding UBS ETF Public or give up 0.67% of portfolio value over 90 days.

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

UBS Barclays Liquid  vs.  UBS ETF Public

UBS Barclays Liquid

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS Barclays Liquid has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, UBS Barclays is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

UBS ETF Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS ETF Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, UBS ETF 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 Barclays and UBS ETF

The main advantage of trading using opposite UBS Barclays and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS Barclays 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 UBS Barclays Liquid and UBS ETF Public 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.