Correlation Between Xtrackers MSCI and UBS ETF

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

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

Diversification Opportunities for Xtrackers MSCI and UBS ETF

0.91

Correlation Coefficient

Xtrackers MSCI  UBS ETF

Almost no diversification

The 3 months correlation between Xtrackers and UBS is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers MSCI Pakistan and UBS ETF Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF Public and Xtrackers MSCI 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 Xtrackers MSCI Pakistan 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 Public has no effect on the direction of Xtrackers MSCI i.e., Xtrackers MSCI and UBS ETF go up and down completely randomly.

Pair Corralation between Xtrackers MSCI and UBS ETF

Assuming the 90 days trading horizon Xtrackers MSCI Pakistan is expected to generate 10.36 times more return on investment than UBS ETF. However, Xtrackers MSCI is 10.36 times more volatile than UBS ETF Public. It trades about 0.35 of its potential returns per unit of risk. UBS ETF Public is currently generating about 0.23 per unit of risk. If you would invest  89.00  in Xtrackers MSCI Pakistan on September 13, 2024 and sell it today you would earn a total of  34.00  from holding Xtrackers MSCI Pakistan or generate 38.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Xtrackers MSCI Pakistan  vs.  UBS ETF Public

Xtrackers MSCI Pakistan

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI Pakistan are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xtrackers MSCI reported solid returns over the last few months and may actually be approaching a breakup point.

UBS ETF Public

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETF Public are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, UBS ETF is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xtrackers MSCI and UBS ETF

The main advantage of trading using opposite Xtrackers MSCI and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers MSCI 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 Xtrackers MSCI Pakistan and UBS ETF Public 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.