Correlation Between IShares EURO and UBS ETF

Can any of the company-specific risk be diversified away by investing in both IShares EURO 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 EURO 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 EURO STOXX and UBS ETF SMIM, you can compare the effects of market volatilities on IShares EURO 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 EURO with a short position of UBS ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares EURO and UBS ETF.

Diversification Opportunities for IShares EURO and UBS ETF

0.87

Correlation Coefficient

IShares EURO  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 EURO STOXX and UBS ETF SMIM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETF SMIM and IShares EURO 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 EURO STOXX 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 SMIM has no effect on the direction of IShares EURO i.e., IShares EURO and UBS ETF go up and down completely randomly.

Pair Corralation between IShares EURO and UBS ETF

Assuming the 90 days trading horizon iShares EURO STOXX is expected to generate 2.06 times more return on investment than UBS ETF. However, IShares EURO is 2.06 times more volatile than UBS ETF SMIM. It trades about 0.14 of its potential returns per unit of risk. UBS ETF SMIM is currently generating about 0.19 per unit of risk. If you would invest  1,854  in iShares EURO STOXX on May 1, 2025 and sell it today you would earn a total of  189.00  from holding iShares EURO STOXX or generate 10.19% return on investment over 90 days.

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

iShares EURO STOXX  vs.  UBS ETF SMIM

iShares EURO STOXX

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares EURO STOXX are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IShares EURO may actually be approaching a critical reversion point that can send shares even higher in August 2025.

UBS ETF SMIM

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETF SMIM are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, UBS ETF may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with IShares EURO and UBS ETF

The main advantage of trading using opposite IShares EURO and UBS ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares EURO 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 EURO STOXX and UBS ETF SMIM 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .