Correlation Between Invesco SP and UBS AG

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

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

Diversification Opportunities for Invesco SP and UBS AG

0.79

Correlation Coefficient

Invesco SP  UBS AG

Poor diversification

The 3 months correlation between Invesco and UBS is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Invesco SP 500 and UBS AG FI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS AG FI and Invesco 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 Invesco SP 500 are associated (or correlated) with UBS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS AG FI has no effect on the direction of Invesco SP i.e., Invesco SP and UBS AG go up and down completely randomly.

Pair Corralation between Invesco SP and UBS AG

Given the investment horizon of 90 days Invesco SP 500 is expected to generate 0.35 times more return on investment than UBS AG. However, Invesco SP 500 is 2.86 times less risky than UBS AG. It trades about -0.27 of its potential returns per unit of risk. UBS AG FI is currently generating about -0.12 per unit of risk. If you would invest  10,672  in Invesco SP 500 on January 30, 2024 and sell it today you would lose (461.00) from holding Invesco SP 500 or give up 4.32% of portfolio value over 90 days.

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

Invesco SP 500  vs.  UBS AG FI

Invesco SP 500

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP 500 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Invesco SP is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

UBS AG FI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UBS AG FI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, UBS AG is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco SP and UBS AG

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

The idea behind Invesco SP 500 and UBS AG FI 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 Stocks Directory module to find actively traded stocks across global markets.