Correlation Between Xtrackers MSCI and UBSFund Solutions

Can any of the company-specific risk be diversified away by investing in both Xtrackers MSCI 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 MSCI 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 MSCI World and UBSFund Solutions MSCI, you can compare the effects of market volatilities on Xtrackers MSCI 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 MSCI with a short position of UBSFund Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers MSCI and UBSFund Solutions.

Diversification Opportunities for Xtrackers MSCI and UBSFund Solutions

0.29

Correlation Coefficient

Xtrackers MSCI  UBSFund Solutions

Modest diversification

The 3 months correlation between Xtrackers and UBSFund is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI World 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 MSCI 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 MSCI World 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 MSCI i.e., Xtrackers MSCI and UBSFund Solutions go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and UBSFund Solutions

Assuming the 90 days trading horizon Xtrackers MSCI is expected to generate 1.36 times less return on investment than UBSFund Solutions. But when comparing it to its historical volatility, Xtrackers MSCI World is 1.25 times less risky than UBSFund Solutions. It trades about 0.03 of its potential returns per unit of risk. UBSFund Solutions MSCI is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,919  in UBSFund Solutions MSCI on October 11, 2024 and sell it today you would earn a total of  21.00  from holding UBSFund Solutions MSCI or generate 0.43% return on investment over 90 days.

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

Xtrackers MSCI World  vs.  UBSFund Solutions MSCI

Xtrackers MSCI World

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI World are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

UBSFund Solutions MSCI

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UBSFund Solutions MSCI are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, UBSFund Solutions is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Xtrackers MSCI and UBSFund Solutions

The main advantage of trading using opposite Xtrackers MSCI and UBSFund Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 MSCI World 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .