Correlation Between UBS Fund and VanEck Defense

Can any of the company-specific risk be diversified away by investing in both UBS Fund and VanEck Defense 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 VanEck Defense 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 VanEck Defense ETF, you can compare the effects of market volatilities on UBS Fund and VanEck Defense 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 VanEck Defense. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Fund and VanEck Defense.

Diversification Opportunities for UBS Fund and VanEck Defense

0.28

Correlation Coefficient

UBS Fund  VanEck Defense

Modest diversification

The 3 months correlation between UBS and VanEck is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding UBS Fund Solutions and VanEck Defense ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Defense ETF 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 VanEck Defense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Defense ETF has no effect on the direction of UBS Fund i.e., UBS Fund and VanEck Defense go up and down completely randomly.

Pair Corralation between UBS Fund and VanEck Defense

Assuming the 90 days trading horizon UBS Fund Solutions is expected to generate 1.0 times more return on investment than VanEck Defense. However, UBS Fund Solutions is 1.0 times less risky than VanEck Defense. It trades about 0.03 of its potential returns per unit of risk. VanEck Defense ETF is currently generating about -0.14 per unit of risk. If you would invest  5,120  in UBS Fund Solutions on September 22, 2024 and sell it today you would earn a total of  29.00  from holding UBS Fund Solutions or generate 0.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

UBS Fund Solutions  vs.  VanEck Defense ETF

UBS Fund Solutions

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Fund Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, UBS Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VanEck Defense ETF

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Defense ETF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, VanEck Defense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with UBS Fund and VanEck Defense

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

The idea behind UBS Fund Solutions and VanEck Defense ETF 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.