Correlation Between UBS ETRACS and Innovator

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

By analyzing existing cross correlation between UBS ETRACS and Innovator SP 500, you can compare the effects of market volatilities on UBS ETRACS and Innovator 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 Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETRACS and Innovator.

Diversification Opportunities for UBS ETRACS and Innovator

-0.19

Correlation Coefficient

UBS ETRACS  Innovator

Good diversification

The 3 months correlation between UBS and Innovator is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 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 Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Innovator go up and down completely randomly.

Pair Corralation between UBS ETRACS and Innovator

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the Innovator. In addition to that, UBS ETRACS is 14.65 times more volatile than Innovator SP 500. It trades about -0.04 of its total potential returns per unit of risk. Innovator SP 500 is currently generating about -0.02 per unit of volatility. If you would invest  4,217  in Innovator SP 500 on December 28, 2024 and sell it today you would lose (32.00) from holding Innovator SP 500 or give up 0.76% of portfolio value over 90 days.

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

UBS ETRACS   vs.  Innovator SP 500

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.

Innovator SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innovator SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Innovator is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UBS ETRACS and Innovator

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

The idea behind UBS ETRACS and Innovator SP 500 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.