Correlation Between UBS AG and Nasdaq 100

Can any of the company-specific risk be diversified away by investing in both UBS AG and Nasdaq 100 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 Nasdaq 100 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 Nasdaq 100 Total, you can compare the effects of market volatilities on UBS AG and Nasdaq 100 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 Nasdaq 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS AG and Nasdaq 100.

Diversification Opportunities for UBS AG and Nasdaq 100

0.85

Correlation Coefficient

UBS AG  Nasdaq 100

Very poor diversification

The 3 months correlation between UBS and Nasdaq is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding UBS AG London and Nasdaq 100 Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Total 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 Nasdaq 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Total has no effect on the direction of UBS AG i.e., UBS AG and Nasdaq 100 go up and down completely randomly.

Pair Corralation between UBS AG and Nasdaq 100

Given the investment horizon of 90 days UBS AG London is expected to generate 1.72 times more return on investment than Nasdaq 100. However, UBS AG is 1.72 times more volatile than Nasdaq 100 Total. It trades about 0.11 of its potential returns per unit of risk. Nasdaq 100 Total is currently generating about 0.05 per unit of risk. If you would invest  4,459  in UBS AG London on September 30, 2024 and sell it today you would earn a total of  1,254  from holding UBS AG London or generate 28.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	92.06%
Values	Daily Returns

UBS AG London  vs.  Nasdaq 100 Total

Pair Trading with UBS AG and Nasdaq 100

The main advantage of trading using opposite UBS AG and Nasdaq 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS AG position performs unexpectedly, Nasdaq 100 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 Nasdaq 100 will offset losses from the drop in Nasdaq 100's long position.

The idea behind UBS AG London and Nasdaq 100 Total 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.