Correlation Between MicroSectors FANG and UBS ETRACS
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and UBS ETRACS 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 MicroSectors FANG and UBS ETRACS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and UBS ETRACS , you can compare the effects of market volatilities on MicroSectors FANG and UBS ETRACS 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 MicroSectors FANG with a short position of UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and UBS ETRACS.
Diversification Opportunities for MicroSectors FANG and UBS ETRACS
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MicroSectors and UBS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and UBS ETRACS go up and down completely randomly.
Pair Corralation between MicroSectors FANG and UBS ETRACS
Given the investment horizon of 90 days MicroSectors FANG Index is expected to generate 1.17 times more return on investment than UBS ETRACS. However, MicroSectors FANG is 1.17 times more volatile than UBS ETRACS . It trades about -0.07 of its potential returns per unit of risk. UBS ETRACS is currently generating about -0.23 per unit of risk. If you would invest 1,847 in MicroSectors FANG Index on August 30, 2024 and sell it today you would lose (140.00) from holding MicroSectors FANG Index or give up 7.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. UBS ETRACS
Performance |
| Timeline |
| MicroSectors FANG Index |
| UBS ETRACS |
MicroSectors FANG and UBS ETRACS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and UBS ETRACS
The main advantage of trading using opposite MicroSectors FANG and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, UBS ETRACS 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 UBS ETRACS will offset losses from the drop in UBS ETRACS's long position.| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
| UBS ETRACS vs. First Trust Exchange Traded | UBS ETRACS vs. Ultimus Managers Trust | UBS ETRACS vs. Horizon Kinetics Medical | UBS ETRACS vs. Harbor 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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