Correlation Between UBS AG and Vanguard Financials
Can any of the company-specific risk be diversified away by investing in both UBS AG and Vanguard Financials 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 Vanguard Financials 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 Vanguard Financials Index, you can compare the effects of market volatilities on UBS AG and Vanguard Financials 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 Vanguard Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS AG and Vanguard Financials.
Diversification Opportunities for UBS AG and Vanguard Financials
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UBS and Vanguard is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and Vanguard Financials Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Financials Index 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 Vanguard Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Financials Index has no effect on the direction of UBS AG i.e., UBS AG and Vanguard Financials go up and down completely randomly.
Pair Corralation between UBS AG and Vanguard Financials
Given the investment horizon of 90 days UBS AG is expected to generate 1.41 times less return on investment than Vanguard Financials. But when comparing it to its historical volatility, UBS AG London is 1.74 times less risky than Vanguard Financials. It trades about 0.3 of its potential returns per unit of risk. Vanguard Financials Index is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 10,991 in Vanguard Financials Index on August 30, 2024 and sell it today you would earn a total of 1,619 from holding Vanguard Financials Index or generate 14.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
UBS AG London vs. Vanguard Financials Index
Performance |
| Timeline |
| UBS AG London |
| Vanguard Financials Index |
UBS AG and Vanguard Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UBS AG and Vanguard Financials
The main advantage of trading using opposite UBS AG and Vanguard Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS AG position performs unexpectedly, Vanguard Financials 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 Vanguard Financials will offset losses from the drop in Vanguard Financials' long position.The idea behind UBS AG London and Vanguard Financials Index 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.| Vanguard Financials vs. Vanguard Industrials Index | Vanguard Financials vs. Vanguard Consumer Discretionary | Vanguard Financials vs. Vanguard Materials Index | Vanguard Financials vs. Vanguard Health Care |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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