Correlation Between UBS Fund and Xtrackers FTSE

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

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

Diversification Opportunities for UBS Fund and Xtrackers FTSE

0.38

Correlation Coefficient

UBS Fund  Xtrackers FTSE

Weak diversification

The 3 months correlation between UBS and Xtrackers is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding UBS Fund Solutions and Xtrackers FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers FTSE and UBS Fund 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 Fund Solutions are associated (or correlated) with Xtrackers FTSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers FTSE has no effect on the direction of UBS Fund i.e., UBS Fund and Xtrackers FTSE go up and down completely randomly.

Pair Corralation between UBS Fund and Xtrackers FTSE

Assuming the 90 days trading horizon UBS Fund is expected to generate 3.39 times less return on investment than Xtrackers FTSE. But when comparing it to its historical volatility, UBS Fund Solutions is 2.47 times less risky than Xtrackers FTSE. It trades about 0.1 of its potential returns per unit of risk. Xtrackers FTSE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,397  in Xtrackers FTSE on September 5, 2024 and sell it today you would earn a total of  601.00  from holding Xtrackers FTSE or generate 25.07% return on investment over 90 days.

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

UBS Fund Solutions  vs.  Xtrackers FTSE

UBS Fund Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Fund Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, UBS Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xtrackers FTSE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers FTSE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Xtrackers FTSE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS Fund and Xtrackers FTSE

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

The idea behind UBS Fund Solutions and Xtrackers FTSE 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.