Correlation Between UBS Group and ABB
Can any of the company-specific risk be diversified away by investing in both UBS Group and ABB 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 Group and ABB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UBS Group AG and ABB, you can compare the effects of market volatilities on UBS Group and ABB 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 Group with a short position of ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Group and ABB.
Diversification Opportunities for UBS Group and ABB
Very weak diversification
The 3 months correlation between UBS and ABB is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding UBS Group AG and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB and UBS Group 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 Group AG are associated (or correlated) with ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of UBS Group i.e., UBS Group and ABB go up and down completely randomly.
Pair Corralation between UBS Group and ABB
Assuming the 90 days trading horizon UBS Group AG is expected to generate 1.27 times more return on investment than ABB. However, UBS Group is 1.27 times more volatile than ABB. It trades about 0.13 of its potential returns per unit of risk. ABB is currently generating about 0.12 per unit of risk. If you would invest 2,806 in UBS Group AG on October 26, 2024 and sell it today you would earn a total of 364.00 from holding UBS Group AG or generate 12.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UBS Group AG vs. ABB
Performance |
| Timeline |
| UBS Group AG |
| ABB |
UBS Group and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UBS Group and ABB
The main advantage of trading using opposite UBS Group and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS Group position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| UBS Group vs. Zurich Insurance Group | UBS Group vs. Novartis AG | UBS Group vs. Swiss Re AG | UBS Group vs. ABB |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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