Correlation Between UBS ETRACS and Invesco SP

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

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

Diversification Opportunities for UBS ETRACS and Invesco SP

0.02

Correlation Coefficient

UBS ETRACS  Invesco SP

Significant diversification

The 3 months correlation between UBS and Invesco is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Invesco SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP 500 has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Invesco SP go up and down completely randomly.

Pair Corralation between UBS ETRACS and Invesco SP

Given the investment horizon of 90 days UBS ETRACS is expected to generate 20.87 times more return on investment than Invesco SP. However, UBS ETRACS is 20.87 times more volatile than Invesco SP 500. It trades about 0.07 of its potential returns per unit of risk. Invesco SP 500 is currently generating about -0.09 per unit of risk. If you would invest  2,026  in UBS ETRACS on December 2, 2024 and sell it today you would earn a total of  203.00  from holding UBS ETRACS or generate 10.02% return on investment over 90 days.

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

UBS ETRACS   vs.  Invesco SP 500

UBS ETRACS

Risk-Adjusted Performance

OK

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 uncertain forward indicators, UBS ETRACS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's fundamental 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.

Pair Trading with UBS ETRACS and Invesco SP

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

The idea behind UBS ETRACS and Invesco 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..