Correlation Between UBS ETRACS and SPDR SP

Can any of the company-specific risk be diversified away by investing in both UBS ETRACS and SPDR 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 SPDR 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 SPDR SP Dividend, you can compare the effects of market volatilities on UBS ETRACS and SPDR 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETRACS and SPDR SP.

Diversification Opportunities for UBS ETRACS and SPDR SP

-0.78

Correlation Coefficient

UBS ETRACS  SPDR SP

Pay attention - limited upside

The 3 months correlation between UBS and SPDR is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and SPDR SP Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Dividend 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Dividend has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and SPDR SP go up and down completely randomly.

Pair Corralation between UBS ETRACS and SPDR SP

Given the investment horizon of 90 days UBS ETRACS is expected to generate 4.56 times more return on investment than SPDR SP. However, UBS ETRACS is 4.56 times more volatile than SPDR SP Dividend. It trades about 0.31 of its potential returns per unit of risk. SPDR SP Dividend is currently generating about -0.02 per unit of risk. If you would invest  1,248  in UBS ETRACS on February 5, 2024 and sell it today you would earn a total of  265.00  from holding UBS ETRACS or generate 21.23% return on investment over 90 days.

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

UBS ETRACS   vs.  SPDR SP Dividend

UBS ETRACS

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Etf's forward indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

SPDR SP Dividend

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR SP Dividend are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, SPDR SP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with UBS ETRACS and SPDR SP

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

The idea behind UBS ETRACS and SPDR SP Dividend 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.