Correlation Between UBS AG and SP High

Can any of the company-specific risk be diversified away by investing in both UBS AG and SP High 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 SP High 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 SP High Yield, you can compare the effects of market volatilities on UBS AG and SP High 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 SP High. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS AG and SP High.

Diversification Opportunities for UBS AG and SP High

-0.45

Correlation Coefficient

UBS AG  SP High

Very good diversification

The 3 months correlation between UBS and SPHYDA is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and SP High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP High Yield 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 SP High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP High Yield has no effect on the direction of UBS AG i.e., UBS AG and SP High go up and down completely randomly.

Pair Corralation between UBS AG and SP High

Given the investment horizon of 90 days UBS AG London is expected to generate 1.24 times more return on investment than SP High. However, UBS AG is 1.24 times more volatile than SP High Yield. It trades about -0.01 of its potential returns per unit of risk. SP High Yield is currently generating about -0.57 per unit of risk. If you would invest  5,724  in UBS AG London on September 25, 2024 and sell it today you would lose (11.00) from holding UBS AG London or give up 0.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	70.0%
Values	Daily Returns

UBS AG London  vs.  SP High Yield

Pair Trading with UBS AG and SP High

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

The idea behind UBS AG London and SP High Yield 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.