Correlation Between UBS ETRACS and IShares MSCI

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

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

Diversification Opportunities for UBS ETRACS and IShares MSCI

-0.25

Correlation Coefficient

UBS ETRACS  IShares MSCI

Very good diversification

The 3 months correlation between UBS and IShares is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and iShares MSCI Spain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI Spain and UBS ETRACS 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 ETRACS are associated (or correlated) with IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI Spain has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and IShares MSCI go up and down completely randomly.

Pair Corralation between UBS ETRACS and IShares MSCI

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the IShares MSCI. In addition to that, UBS ETRACS is 6.41 times more volatile than iShares MSCI Spain. It trades about -0.05 of its total potential returns per unit of risk. iShares MSCI Spain is currently generating about 0.36 per unit of volatility. If you would invest  3,065  in iShares MSCI Spain on December 19, 2024 and sell it today you would earn a total of  822.00  from holding iShares MSCI Spain or generate 26.82% return on investment over 90 days.

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

UBS ETRACS   vs.  iShares MSCI Spain

UBS ETRACS

Risk-Adjusted Performance

Very Weak

Over the last 90 days UBS ETRACS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's forward indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

iShares MSCI Spain

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI Spain are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, IShares MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS ETRACS and IShares MSCI

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

The idea behind UBS ETRACS and iShares MSCI Spain 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.