Correlation Between UBS Group and Roche Holding

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

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

Diversification Opportunities for UBS Group and Roche Holding

-0.32

Correlation Coefficient

UBS Group  Roche Holding

Very good diversification

The 3 months correlation between UBS and Roche is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding UBS Group AG and Roche Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding AG and UBS Group 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 Group AG are associated (or correlated) with Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding AG has no effect on the direction of UBS Group i.e., UBS Group and Roche Holding go up and down completely randomly.

Pair Corralation between UBS Group and Roche Holding

Assuming the 90 days trading horizon UBS Group AG is expected to generate 1.42 times more return on investment than Roche Holding. However, UBS Group is 1.42 times more volatile than Roche Holding AG. It trades about 0.12 of its potential returns per unit of risk. Roche Holding AG is currently generating about -0.14 per unit of risk. If you would invest  2,552  in UBS Group AG on September 3, 2024 and sell it today you would earn a total of  296.00  from holding UBS Group AG or generate 11.6% return on investment over 90 days.

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

UBS Group AG  vs.  Roche Holding AG

UBS Group AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Group AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, UBS Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Roche Holding AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roche Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with UBS Group and Roche Holding

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

The idea behind UBS Group AG and Roche Holding AG 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.