Correlation Between UBS Money and IShares Equity

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

By analyzing existing cross correlation between UBS Money Market and iShares Equity Enhanced, you can compare the effects of market volatilities on UBS Money and IShares Equity 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 Money with a short position of IShares Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Money and IShares Equity.

Diversification Opportunities for UBS Money and IShares Equity

0.91

Correlation Coefficient

UBS Money  IShares Equity

Almost no diversification

The 3 months correlation between UBS and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding UBS Money Market and iShares Equity Enhanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Equity Enhanced and UBS Money 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 Money Market are associated (or correlated) with IShares Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Equity Enhanced has no effect on the direction of UBS Money i.e., UBS Money and IShares Equity go up and down completely randomly.

Pair Corralation between UBS Money and IShares Equity

Assuming the 90 days trading horizon UBS Money Market is expected to generate 0.51 times more return on investment than IShares Equity. However, UBS Money Market is 1.95 times less risky than IShares Equity. It trades about -0.06 of its potential returns per unit of risk. iShares Equity Enhanced is currently generating about -0.1 per unit of risk. If you would invest  193,882  in UBS Money Market on December 28, 2024 and sell it today you would lose (4,062) from holding UBS Money Market or give up 2.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

UBS Money Market  vs.  iShares Equity Enhanced

UBS Money Market

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS Money Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound technical and fundamental indicators, UBS Money is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

iShares Equity Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Equity Enhanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Pair Trading with UBS Money and IShares Equity

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

The idea behind UBS Money Market and iShares Equity Enhanced 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.