Correlation Between UBS ETRACS and Invesco DB

Can any of the company-specific risk be diversified away by investing in both UBS ETRACS and Invesco DB 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 DB 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 DB Agriculture, you can compare the effects of market volatilities on UBS ETRACS and Invesco DB 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 DB. Check out your portfolio center. Please also check ongoing floating volatility patterns of UBS ETRACS and Invesco DB.

Diversification Opportunities for UBS ETRACS and Invesco DB

-0.66

Correlation Coefficient

UBS ETRACS  Invesco DB

Excellent diversification

The 3 months correlation between UBS and Invesco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Invesco DB Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DB Agriculture 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 DB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DB Agriculture has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Invesco DB go up and down completely randomly.

Pair Corralation between UBS ETRACS and Invesco DB

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the Invesco DB. In addition to that, UBS ETRACS is 4.26 times more volatile than Invesco DB Agriculture. It trades about -0.02 of its total potential returns per unit of risk. Invesco DB Agriculture is currently generating about 0.05 per unit of volatility. If you would invest  2,074  in Invesco DB Agriculture on March 8, 2024 and sell it today you would earn a total of  479.00  from holding Invesco DB Agriculture or generate 23.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	66.46%
Values	Daily Returns

UBS ETRACS   vs.  Invesco DB Agriculture

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 latest weak performance, the Etf's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Invesco DB Agriculture

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco DB Agriculture are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Invesco DB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UBS ETRACS and Invesco DB

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

The idea behind UBS ETRACS and Invesco DB Agriculture 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.