Correlation Between UBS ETRACS and MicroSectors Gold

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

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

Diversification Opportunities for UBS ETRACS and MicroSectors Gold

-0.36

Correlation Coefficient

UBS ETRACS  MicroSectors Gold

Very good diversification

The 3 months correlation between UBS and MicroSectors is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and MicroSectors Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectors Gold Miners 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 MicroSectors Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectors Gold Miners has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and MicroSectors Gold go up and down completely randomly.

Pair Corralation between UBS ETRACS and MicroSectors Gold

Given the investment horizon of 90 days UBS ETRACS is expected to generate 2.23 times less return on investment than MicroSectors Gold. But when comparing it to its historical volatility, UBS ETRACS is 1.55 times less risky than MicroSectors Gold. It trades about 0.01 of its potential returns per unit of risk. MicroSectors Gold Miners is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,853  in MicroSectors Gold Miners on September 1, 2024 and sell it today you would lose (122.00) from holding MicroSectors Gold Miners or give up 3.17% 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.  MicroSectors Gold Miners

UBS ETRACS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETRACS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward indicators, UBS ETRACS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

MicroSectors Gold Miners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, MicroSectors Gold may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with UBS ETRACS and MicroSectors Gold

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

The idea behind UBS ETRACS and MicroSectors Gold Miners 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.