Correlation Between SPDR MSCI and UBS ETF
Can any of the company-specific risk be diversified away by investing in both SPDR MSCI and UBS ETF 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 SPDR MSCI and UBS ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR MSCI World and UBS ETF plc, you can compare the effects of market volatilities on SPDR MSCI and UBS ETF 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 SPDR MSCI with a short position of UBS ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR MSCI and UBS ETF.
Diversification Opportunities for SPDR MSCI and UBS ETF
Very poor diversification
The 3 months correlation between SPDR and UBS is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding SPDR MSCI World and UBS ETF plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF plc and SPDR MSCI 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 SPDR MSCI World are associated (or correlated) with UBS ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETF plc has no effect on the direction of SPDR MSCI i.e., SPDR MSCI and UBS ETF go up and down completely randomly.
Pair Corralation between SPDR MSCI and UBS ETF
Assuming the 90 days trading horizon SPDR MSCI is expected to generate 1.01 times less return on investment than UBS ETF. In addition to that, SPDR MSCI is 1.66 times more volatile than UBS ETF plc. It trades about 0.08 of its total potential returns per unit of risk. UBS ETF plc is currently generating about 0.14 per unit of volatility. If you would invest 2,343 in UBS ETF plc on September 2, 2024 and sell it today you would earn a total of 150.00 from holding UBS ETF plc or generate 6.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.48% |
| Values | Daily Returns |
SPDR MSCI World vs. UBS ETF plc
Performance |
| Timeline |
| SPDR MSCI World |
| UBS ETF plc |
SPDR MSCI and UBS ETF Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR MSCI and UBS ETF
The main advantage of trading using opposite SPDR MSCI and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR MSCI position performs unexpectedly, UBS ETF 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 ETF will offset losses from the drop in UBS ETF's long position.The idea behind SPDR MSCI World and UBS ETF plc 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.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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