Correlation Between UBS Fund and IShares Govt

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

By analyzing existing cross correlation between UBS Fund Solutions and iShares Govt Bond, you can compare the effects of market volatilities on UBS Fund and IShares Govt 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 Fund with a short position of IShares Govt. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS Fund and IShares Govt.

Diversification Opportunities for UBS Fund and IShares Govt

0.38

Correlation Coefficient

UBS Fund  IShares Govt

Weak diversification

The 3 months correlation between UBS and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding UBS Fund Solutions and iShares Govt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Govt Bond and UBS Fund 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 Fund Solutions are associated (or correlated) with IShares Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Govt Bond has no effect on the direction of UBS Fund i.e., UBS Fund and IShares Govt go up and down completely randomly.

Pair Corralation between UBS Fund and IShares Govt

Assuming the 90 days trading horizon UBS Fund Solutions is expected to generate 2.64 times more return on investment than IShares Govt. However, UBS Fund is 2.64 times more volatile than iShares Govt Bond. It trades about 0.39 of its potential returns per unit of risk. iShares Govt Bond is currently generating about 0.44 per unit of risk. If you would invest  4,967  in UBS Fund Solutions on September 5, 2024 and sell it today you would earn a total of  427.00  from holding UBS Fund Solutions or generate 8.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

UBS Fund Solutions  vs.  iShares Govt Bond

UBS Fund Solutions

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Fund Solutions are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, UBS Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

iShares Govt Bond

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Govt Bond are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, IShares Govt is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UBS Fund and IShares Govt

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

The idea behind UBS Fund Solutions and iShares Govt Bond 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.