Correlation Between UBS Plc and Xtrackers

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

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

Diversification Opportunities for UBS Plc and Xtrackers

0.99

Correlation Coefficient

UBS Plc  Xtrackers

No risk reduction

The 3 months correlation between UBS and Xtrackers is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding UBS plc and Xtrackers SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers SP and UBS Plc 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 plc are associated (or correlated) with Xtrackers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers SP has no effect on the direction of UBS Plc i.e., UBS Plc and Xtrackers go up and down completely randomly.

Pair Corralation between UBS Plc and Xtrackers

Assuming the 90 days trading horizon UBS plc is expected to generate 0.47 times more return on investment than Xtrackers. However, UBS plc is 2.11 times less risky than Xtrackers. It trades about 0.0 of its potential returns per unit of risk. Xtrackers SP is currently generating about -0.01 per unit of risk. If you would invest  9,229  in UBS plc on September 25, 2024 and sell it today you would lose (5.00) from holding UBS plc or give up 0.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

UBS plc   vs.  Xtrackers SP

UBS plc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UBS plc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, UBS Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Xtrackers SP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers SP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS Plc and Xtrackers

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

The idea behind UBS plc and Xtrackers SP 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 Commodity Directory module to find actively traded commodities issued by global exchanges.