Correlation Between T Rowe and UBS ETRACS

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

By analyzing existing cross correlation between T Rowe Price and UBS ETRACS , you can compare the effects of market volatilities on T Rowe 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 T Rowe with a short position of UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of T Rowe and UBS ETRACS.

Diversification Opportunities for T Rowe and UBS ETRACS

-0.6

Correlation Coefficient

T Rowe  UBS ETRACS

Excellent diversification

The 3 months correlation between TGRW and UBS is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding T Rowe Price and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and T Rowe 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 T Rowe Price 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 T Rowe i.e., T Rowe and UBS ETRACS go up and down completely randomly.

Pair Corralation between T Rowe and UBS ETRACS

Given the investment horizon of 90 days T Rowe Price is expected to generate 0.25 times more return on investment than UBS ETRACS. However, T Rowe Price is 3.96 times less risky than UBS ETRACS. It trades about 0.18 of its potential returns per unit of risk. UBS ETRACS is currently generating about -0.03 per unit of risk. If you would invest  3,586  in T Rowe Price on September 2, 2024 and sell it today you would earn a total of  414.00  from holding T Rowe Price or generate 11.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

T Rowe Price  vs.  UBS ETRACS

T Rowe Price

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in T Rowe Price are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, T Rowe may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UBS ETRACS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS ETRACS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, UBS ETRACS is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with T Rowe and UBS ETRACS

The main advantage of trading using opposite T Rowe and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T Rowe 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.

The idea behind T Rowe Price and UBS ETRACS 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.