Correlation Between UBS AG and VanEck Mortgage

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

By analyzing existing cross correlation between UBS AG London and VanEck Mortgage REIT, you can compare the effects of market volatilities on UBS AG and VanEck Mortgage 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 AG with a short position of VanEck Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS AG and VanEck Mortgage.

Diversification Opportunities for UBS AG and VanEck Mortgage

-0.49

Correlation Coefficient

UBS AG  VanEck Mortgage

Very good diversification

The 3 months correlation between UBS and VanEck is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and VanEck Mortgage REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Mortgage REIT and UBS AG 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 AG London are associated (or correlated) with VanEck Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Mortgage REIT has no effect on the direction of UBS AG i.e., UBS AG and VanEck Mortgage go up and down completely randomly.

Pair Corralation between UBS AG and VanEck Mortgage

Given the investment horizon of 90 days UBS AG London is expected to generate 1.63 times more return on investment than VanEck Mortgage. However, UBS AG is 1.63 times more volatile than VanEck Mortgage REIT. It trades about 0.23 of its potential returns per unit of risk. VanEck Mortgage REIT is currently generating about -0.09 per unit of risk. If you would invest  4,676  in UBS AG London on September 25, 2024 and sell it today you would earn a total of  1,037  from holding UBS AG London or generate 22.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

UBS AG London  vs.  VanEck Mortgage REIT

UBS AG London

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days UBS AG London has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite conflicting fundamental indicators, UBS AG disclosed solid returns over the last few months and may actually be approaching a breakup point.

VanEck Mortgage REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Mortgage REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, VanEck Mortgage is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UBS AG and VanEck Mortgage

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

The idea behind UBS AG London and VanEck Mortgage REIT 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.