Correlation Between UBS ETRACS and IShares IBonds

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

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

Diversification Opportunities for UBS ETRACS and IShares IBonds

0.52

Correlation Coefficient

UBS ETRACS  IShares IBonds

Very weak diversification

The 3 months correlation between UBS and IShares is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec 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 IShares IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and IShares IBonds go up and down completely randomly.

Pair Corralation between UBS ETRACS and IShares IBonds

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the IShares IBonds. In addition to that, UBS ETRACS is 25.19 times more volatile than iShares iBonds Dec. It trades about -0.06 of its total potential returns per unit of risk. iShares iBonds Dec is currently generating about -0.16 per unit of volatility. If you would invest  2,529  in iShares iBonds Dec on January 30, 2024 and sell it today you would lose (8.00) from holding iShares iBonds Dec or give up 0.32% of portfolio value over 90 days.

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

UBS ETRACS   vs.  iShares iBonds Dec

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

iShares iBonds Dec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares iBonds Dec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, IShares IBonds is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with UBS ETRACS and IShares IBonds

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

The idea behind UBS ETRACS and iShares iBonds Dec 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.