Correlation Between UBS AG and SPDR SP
Can any of the company-specific risk be diversified away by investing in both UBS AG 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 AG 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 AG London and SPDR SP Regional, you can compare the effects of market volatilities on UBS AG 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 AG with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS AG and SPDR SP.
Diversification Opportunities for UBS AG and SPDR SP
Poor diversification
The 3 months correlation between UBS and SPDR is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and SPDR SP Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Regional and UBS AG 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 AG London 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 Regional has no effect on the direction of UBS AG i.e., UBS AG and SPDR SP go up and down completely randomly.
Pair Corralation between UBS AG and SPDR SP
Given the investment horizon of 90 days UBS AG is expected to generate 1.17 times less return on investment than SPDR SP. But when comparing it to its historical volatility, UBS AG London is 3.72 times less risky than SPDR SP. It trades about 0.6 of its potential returns per unit of risk. SPDR SP Regional is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 5,981 in SPDR SP Regional on August 31, 2024 and sell it today you would earn a total of 792.00 from holding SPDR SP Regional or generate 13.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UBS AG London vs. SPDR SP Regional
Performance |
| Timeline |
| UBS AG London |
| SPDR SP Regional |
UBS AG and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UBS AG and SPDR SP
The main advantage of trading using opposite UBS AG and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS AG 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 AG London and SPDR SP Regional 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.| SPDR SP vs. Financial Select Sector | SPDR SP vs. Vanguard Financials Index | SPDR SP vs. SPDR SP Bank | SPDR SP vs. iShares Financials ETF |
Check out your portfolio center.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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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