Correlation Between UBS ETRACS and Invesco SP

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

By analyzing existing cross correlation between UBS ETRACS and Invesco SP Global, you can compare the effects of market volatilities on UBS ETRACS and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETRACS and Invesco SP.

Diversification Opportunities for UBS ETRACS and Invesco SP

-0.46

Correlation Coefficient

UBS ETRACS  Invesco SP

Very good diversification

The 3 months correlation between UBS and Invesco is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Invesco SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP Global 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP Global has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Invesco SP go up and down completely randomly.

Pair Corralation between UBS ETRACS and Invesco SP

Given the investment horizon of 90 days UBS ETRACS is expected to generate 11.96 times more return on investment than Invesco SP. However, UBS ETRACS is 11.96 times more volatile than Invesco SP Global. It trades about 0.07 of its potential returns per unit of risk. Invesco SP Global is currently generating about 0.26 per unit of risk. If you would invest  2,079  in UBS ETRACS on February 17, 2024 and sell it today you would earn a total of  435.00  from holding UBS ETRACS or generate 20.92% return on investment over 90 days.

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

UBS ETRACS   vs.  Invesco SP Global

UBS ETRACS

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETRACS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward indicators, UBS ETRACS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Invesco SP Global

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco SP Global are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Invesco SP may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with UBS ETRACS and Invesco SP

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

The idea behind UBS ETRACS and Invesco SP Global 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.