Correlation Between IShares SP and UBS ETF

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

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

Diversification Opportunities for IShares SP and UBS ETF

0.87

Correlation Coefficient

IShares SP  UBS ETF

Very poor diversification

The 3 months correlation between IShares and UBS is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and UBS ETF plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF plc and IShares 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 iShares 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 plc has no effect on the direction of IShares SP i.e., IShares SP and UBS ETF go up and down completely randomly.

Pair Corralation between IShares SP and UBS ETF

Assuming the 90 days trading horizon iShares SP 500 is expected to under-perform the UBS ETF. But the etf apears to be less risky and, when comparing its historical volatility, iShares SP 500 is 1.13 times less risky than UBS ETF. The etf trades about -0.11 of its potential returns per unit of risk. The UBS ETF plc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,740  in UBS ETF plc on February 7, 2024 and sell it today you would lose (99.00) from holding UBS ETF plc or give up 1.28% of portfolio value over 90 days.

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

iShares SP 500  vs.  UBS ETF plc

iShares SP 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

UBS ETF plc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETF plc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, UBS ETF may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with IShares SP and UBS ETF

The main advantage of trading using opposite IShares SP and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 iShares SP 500 and UBS ETF plc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.