Correlation Between UBS ETRACS and Ready Capital

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

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

Diversification Opportunities for UBS ETRACS and Ready Capital

0.11

Correlation Coefficient

UBS ETRACS  Ready Capital

Average diversification

The 3 months correlation between UBS and Ready is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Ready Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ready Capital 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 Ready Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ready Capital has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Ready Capital go up and down completely randomly.

Pair Corralation between UBS ETRACS and Ready Capital

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the Ready Capital. In addition to that, UBS ETRACS is 14.91 times more volatile than Ready Capital. It trades about -0.05 of its total potential returns per unit of risk. Ready Capital is currently generating about -0.12 per unit of volatility. If you would invest  2,441  in Ready Capital on December 27, 2024 and sell it today you would lose (87.00) from holding Ready Capital or give up 3.56% of portfolio value over 90 days.

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

UBS ETRACS   vs.  Ready Capital

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 weak 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.

Ready Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ready Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Ready Capital is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UBS ETRACS and Ready Capital

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

The idea behind UBS ETRACS and Ready Capital 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.