Correlation Between UBS ETF and SPDR SP

Can any of the company-specific risk be diversified away by investing in both UBS ETF and SPDR SP 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 ETF and SPDR SP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UBS ETF MSCI and SPDR SP Utilities, you can compare the effects of market volatilities on UBS ETF and SPDR SP 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 ETF with a short position of SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETF and SPDR SP.

Diversification Opportunities for UBS ETF and SPDR SP

0.12

Correlation Coefficient

UBS ETF  SPDR SP

Average diversification

The 3 months correlation between UBS and SPDR is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETF MSCI and SPDR SP Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Utilities and UBS ETF 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 ETF MSCI are associated (or correlated) with SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Utilities has no effect on the direction of UBS ETF i.e., UBS ETF and SPDR SP go up and down completely randomly.

Pair Corralation between UBS ETF and SPDR SP

Assuming the 90 days trading horizon UBS ETF is expected to generate 1.81 times less return on investment than SPDR SP. But when comparing it to its historical volatility, UBS ETF MSCI is 1.31 times less risky than SPDR SP. It trades about 0.08 of its potential returns per unit of risk. SPDR SP Utilities is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,672  in SPDR SP Utilities on September 14, 2024 and sell it today you would earn a total of  1,043  from holding SPDR SP Utilities or generate 28.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

UBS ETF MSCI  vs.  SPDR SP Utilities

UBS ETF MSCI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS ETF MSCI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UBS ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SPDR SP Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPDR SP Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, SPDR SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with UBS ETF and SPDR SP

The main advantage of trading using opposite UBS ETF and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS ETF position performs unexpectedly, SPDR SP 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 SPDR SP will offset losses from the drop in SPDR SP's long position.

The idea behind UBS ETF MSCI and SPDR SP Utilities 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.