Correlation Between UBS ETRACS and WisdomTree Mortgage

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

By analyzing existing cross correlation between UBS ETRACS and WisdomTree Mortgage Plus, you can compare the effects of market volatilities on UBS ETRACS and WisdomTree Mortgage 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 WisdomTree Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETRACS and WisdomTree Mortgage.

Diversification Opportunities for UBS ETRACS and WisdomTree Mortgage

0.0

Correlation Coefficient

UBS ETRACS  WisdomTree Mortgage

Pay attention - limited upside

The 3 months correlation between UBS and WisdomTree is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and WisdomTree Mortgage Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Mortgage Plus 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 WisdomTree Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Mortgage Plus has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and WisdomTree Mortgage go up and down completely randomly.

Pair Corralation between UBS ETRACS and WisdomTree Mortgage

If you would invest  2,738  in UBS ETRACS on October 9, 2024 and sell it today you would lose (740.00) from holding UBS ETRACS or give up 27.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

UBS ETRACS   vs.  WisdomTree Mortgage Plus

UBS ETRACS

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETRACS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal forward indicators, UBS ETRACS exhibited solid returns over the last few months and may actually be approaching a breakup point.

WisdomTree Mortgage Plus

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Mortgage Plus has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, WisdomTree Mortgage is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with UBS ETRACS and WisdomTree Mortgage

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

The idea behind UBS ETRACS and WisdomTree Mortgage Plus 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.