Correlation Between Xtrackers USD and UBSFund Solutions

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

By analyzing existing cross correlation between Xtrackers USD Corporate and UBSFund Solutions MSCI, you can compare the effects of market volatilities on Xtrackers USD and UBSFund Solutions 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 Xtrackers USD with a short position of UBSFund Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers USD and UBSFund Solutions.

Diversification Opportunities for Xtrackers USD and UBSFund Solutions

0.08

Correlation Coefficient

Xtrackers USD  UBSFund Solutions

Significant diversification

The 3 months correlation between Xtrackers and UBSFund is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers USD Corporate and UBSFund Solutions MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBSFund Solutions MSCI and Xtrackers USD 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 Xtrackers USD Corporate are associated (or correlated) with UBSFund Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBSFund Solutions MSCI has no effect on the direction of Xtrackers USD i.e., Xtrackers USD and UBSFund Solutions go up and down completely randomly.

Pair Corralation between Xtrackers USD and UBSFund Solutions

Assuming the 90 days trading horizon Xtrackers USD Corporate is expected to generate 5.46 times more return on investment than UBSFund Solutions. However, Xtrackers USD is 5.46 times more volatile than UBSFund Solutions MSCI. It trades about 0.24 of its potential returns per unit of risk. UBSFund Solutions MSCI is currently generating about -0.02 per unit of risk. If you would invest  1,134  in Xtrackers USD Corporate on October 26, 2024 and sell it today you would earn a total of  143.00  from holding Xtrackers USD Corporate or generate 12.61% return on investment over 90 days.

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

Xtrackers USD Corporate  vs.  UBSFund Solutions MSCI

Xtrackers USD Corporate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers USD Corporate are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Xtrackers USD is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

UBSFund Solutions MSCI

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBSFund Solutions MSCI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, UBSFund Solutions may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Xtrackers USD and UBSFund Solutions

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

The idea behind Xtrackers USD Corporate and UBSFund Solutions MSCI 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.