Correlation Between SPDR SP and UBS Fund

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

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

Diversification Opportunities for SPDR SP and UBS Fund

0.46

Correlation Coefficient

SPDR SP  UBS Fund

Very weak diversification

The 3 months correlation between SPDR and UBS is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Utilities and UBS Fund Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Fund Solutions and SPDR SP 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 SPDR SP Utilities are associated (or correlated) with UBS Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Fund Solutions has no effect on the direction of SPDR SP i.e., SPDR SP and UBS Fund go up and down completely randomly.

Pair Corralation between SPDR SP and UBS Fund

Assuming the 90 days trading horizon SPDR SP Utilities is expected to generate 0.89 times more return on investment than UBS Fund. However, SPDR SP Utilities is 1.12 times less risky than UBS Fund. It trades about 0.18 of its potential returns per unit of risk. UBS Fund Solutions is currently generating about 0.1 per unit of risk. If you would invest  4,169  in SPDR SP Utilities on September 5, 2024 and sell it today you would earn a total of  516.00  from holding SPDR SP Utilities or generate 12.38% return on investment over 90 days.

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

SPDR SP Utilities  vs.  UBS Fund Solutions

SPDR SP Utilities

Risk-Adjusted Performance

14 of 100

Good

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

UBS Fund Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Fund Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, UBS Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SPDR SP and UBS Fund

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

The idea behind SPDR SP Utilities and UBS Fund Solutions 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.