Correlation Between Vanguard and UBS ETF

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

By analyzing existing cross correlation between Vanguard SP 500 and UBS ETF SXI, you can compare the effects of market volatilities on Vanguard and UBS ETF 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 Vanguard with a short position of UBS ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard and UBS ETF.

Diversification Opportunities for Vanguard and UBS ETF

0.8

Correlation Coefficient

Vanguard  UBS ETF

Very poor diversification

The 3 months correlation between Vanguard and UBS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and UBS ETF SXI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF SXI and Vanguard 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 Vanguard SP 500 are associated (or correlated) with UBS ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETF SXI has no effect on the direction of Vanguard i.e., Vanguard and UBS ETF go up and down completely randomly.

Pair Corralation between Vanguard and UBS ETF

Assuming the 90 days trading horizon Vanguard SP 500 is expected to generate 1.64 times more return on investment than UBS ETF. However, Vanguard is 1.64 times more volatile than UBS ETF SXI. It trades about 0.24 of its potential returns per unit of risk. UBS ETF SXI is currently generating about 0.27 per unit of risk. If you would invest  9,036  in Vanguard SP 500 on September 13, 2024 and sell it today you would earn a total of  1,170  from holding Vanguard SP 500 or generate 12.95% return on investment over 90 days.

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

Vanguard SP 500  vs.  UBS ETF SXI

Vanguard SP 500

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Vanguard may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UBS ETF SXI

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETF SXI are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal technical and fundamental indicators, UBS ETF may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vanguard and UBS ETF

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

The idea behind Vanguard SP 500 and UBS ETF SXI 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.