Correlation Between DB Gold and UBS ETRACS

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

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

Diversification Opportunities for DB Gold and UBS ETRACS

0.81

Correlation Coefficient

DB Gold  UBS ETRACS

Very poor diversification

The 3 months correlation between DGZ and UBS is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding DB Gold Short and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and DB Gold 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 DB Gold Short are associated (or correlated) with UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of DB Gold i.e., DB Gold and UBS ETRACS go up and down completely randomly.

Pair Corralation between DB Gold and UBS ETRACS

Considering the 90-day investment horizon DB Gold Short is expected to generate 0.74 times more return on investment than UBS ETRACS. However, DB Gold Short is 1.34 times less risky than UBS ETRACS. It trades about -0.09 of its potential returns per unit of risk. UBS ETRACS is currently generating about -0.19 per unit of risk. If you would invest  1,010  in DB Gold Short on February 18, 2024 and sell it today you would lose (122.00) from holding DB Gold Short or give up 12.08% of portfolio value over 90 days.

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

DB Gold Short  vs.  UBS ETRACS

DB Gold Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Gold Short has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

UBS ETRACS

Risk-Adjusted Performance

0 of 100

Very Weak

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 June 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with DB Gold and UBS ETRACS

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

The idea behind DB Gold Short and UBS ETRACS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.