Correlation Between Barclays PLC and UBS Group

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

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

Diversification Opportunities for Barclays PLC and UBS Group

0.45

Correlation Coefficient

Barclays PLC  UBS Group

Very weak diversification

The 3 months correlation between Barclays and UBS is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC ADR and UBS Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Group AG and Barclays PLC 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 Barclays PLC ADR are associated (or correlated) with UBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Group AG has no effect on the direction of Barclays PLC i.e., Barclays PLC and UBS Group go up and down completely randomly.

Pair Corralation between Barclays PLC and UBS Group

Considering the 90-day investment horizon Barclays PLC ADR is expected to generate 1.28 times more return on investment than UBS Group. However, Barclays PLC is 1.28 times more volatile than UBS Group AG. It trades about 0.08 of its potential returns per unit of risk. UBS Group AG is currently generating about -0.01 per unit of risk. If you would invest  1,230  in Barclays PLC ADR on September 27, 2024 and sell it today you would earn a total of  115.00  from holding Barclays PLC ADR or generate 9.35% return on investment over 90 days.

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

Barclays PLC ADR  vs.  UBS Group AG

Barclays PLC ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Barclays PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

UBS Group AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UBS Group AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, UBS Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Barclays PLC and UBS Group

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

The idea behind Barclays PLC ADR and UBS Group AG 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.