Correlation Between First Trust and UBS ETRACS
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and UBS ETRACS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust Exchange Traded and UBS ETRACS , you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and UBS ETRACS.
Diversification Opportunities for First Trust and UBS ETRACS
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and UBS is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Trust Exchange Traded and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and First Trust 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 First Trust Exchange Traded 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 First Trust i.e., First Trust and UBS ETRACS go up and down completely randomly.
Pair Corralation between First Trust and UBS ETRACS
Given the investment horizon of 90 days First Trust Exchange Traded is expected to under-perform the UBS ETRACS. But the etf apears to be less risky and, when comparing its historical volatility, First Trust Exchange Traded is 8.49 times less risky than UBS ETRACS. The etf trades about -0.39 of its potential returns per unit of risk. The UBS ETRACS is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,756 in UBS ETRACS on November 27, 2024 and sell it today you would lose (57.00) from holding UBS ETRACS or give up 3.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust Exchange Traded vs. UBS ETRACS
Performance |
| Timeline |
| First Trust Exchange |
| UBS ETRACS |
First Trust and UBS ETRACS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and UBS ETRACS
The main advantage of trading using opposite First Trust and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Expanded | First Trust vs. BlackRock Future Health | First Trust vs. SPDR SP Health |
| UBS ETRACS vs. Ultimus Managers Trust | UBS ETRACS vs. American Beacon Select | UBS ETRACS vs. First Trust Indxx | UBS ETRACS vs. Direxion Daily Regional |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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