Correlation Between UBS ETRACS and Themes Transatlantic

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

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

Diversification Opportunities for UBS ETRACS and Themes Transatlantic

-0.42

Correlation Coefficient

UBS ETRACS  Themes Transatlantic

Very good diversification

The 3 months correlation between UBS and Themes is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Themes Transatlantic Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Transatlantic 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 Themes Transatlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Transatlantic has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Themes Transatlantic go up and down completely randomly.

Pair Corralation between UBS ETRACS and Themes Transatlantic

Given the investment horizon of 90 days UBS ETRACS is expected to generate 3.81 times more return on investment than Themes Transatlantic. However, UBS ETRACS is 3.81 times more volatile than Themes Transatlantic Defense. It trades about 0.16 of its potential returns per unit of risk. Themes Transatlantic Defense is currently generating about -0.16 per unit of risk. If you would invest  1,813  in UBS ETRACS on October 9, 2024 and sell it today you would earn a total of  185.00  from holding UBS ETRACS or generate 10.2% return on investment over 90 days.

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

UBS ETRACS   vs.  Themes Transatlantic Defense

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.

Themes Transatlantic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Themes Transatlantic Defense has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Themes Transatlantic is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UBS ETRACS and Themes Transatlantic

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

The idea behind UBS ETRACS and Themes Transatlantic Defense 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.