Correlation Between Financial Select and UBS ETRACS
Can any of the company-specific risk be diversified away by investing in both Financial Select 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 Financial Select and UBS ETRACS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and UBS ETRACS , you can compare the effects of market volatilities on Financial Select 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 Financial Select with a short position of UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and UBS ETRACS.
Diversification Opportunities for Financial Select and UBS ETRACS
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Financial and UBS is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and Financial Select 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 Financial Select Sector 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 Financial Select i.e., Financial Select and UBS ETRACS go up and down completely randomly.
Pair Corralation between Financial Select and UBS ETRACS
Considering the 90-day investment horizon Financial Select Sector is expected to generate 0.24 times more return on investment than UBS ETRACS. However, Financial Select Sector is 4.25 times less risky than UBS ETRACS. It trades about 0.15 of its potential returns per unit of risk. UBS ETRACS is currently generating about -0.03 per unit of risk. If you would invest 3,232 in Financial Select Sector on September 1, 2024 and sell it today you would earn a total of 1,902 from holding Financial Select Sector or generate 58.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Financial Select Sector vs. UBS ETRACS
Performance |
| Timeline |
| Financial Select Sector |
| UBS ETRACS |
Financial Select and UBS ETRACS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and UBS ETRACS
The main advantage of trading using opposite Financial Select and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select 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.| Financial Select vs. Vanguard Financials Index | Financial Select vs. SPDR SP Bank | Financial Select vs. iShares Financials ETF | Financial Select vs. Fidelity MSCI Financials |
| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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