Correlation Between UBS ETRACS and Bank of Montreal

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

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

Diversification Opportunities for UBS ETRACS and Bank of Montreal

0.75

Correlation Coefficient

UBS ETRACS  Bank of Montreal

Poor diversification

The 3 months correlation between UBS and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Bank of Montreal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Montreal and UBS ETRACS 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 UBS ETRACS are associated (or correlated) with Bank of Montreal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Montreal has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Bank of Montreal go up and down completely randomly.

Pair Corralation between UBS ETRACS and Bank of Montreal

Given the investment horizon of 90 days UBS ETRACS is expected to generate 1.52 times more return on investment than Bank of Montreal. However, UBS ETRACS is 1.52 times more volatile than Bank of Montreal. It trades about -0.07 of its potential returns per unit of risk. Bank of Montreal is currently generating about -0.25 per unit of risk. If you would invest  1,956  in UBS ETRACS on May 7, 2025 and sell it today you would lose (483.00) from holding UBS ETRACS or give up 24.69% of portfolio value over 90 days.

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

UBS ETRACS   vs.  Bank of Montreal

UBS ETRACS

Risk-Adjusted Performance

Weakest

Over the last 90 days UBS ETRACS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's forward indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Bank of Montreal

Risk-Adjusted Performance

Weakest

Over the last 90 days Bank of Montreal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Etf's forward-looking signals remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with UBS ETRACS and Bank of Montreal

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

The idea behind UBS ETRACS and Bank of Montreal 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.