Correlation Between UBS ETRACS and Global X

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

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

Diversification Opportunities for UBS ETRACS and Global X

-0.86

Correlation Coefficient

UBS ETRACS  Global X

Pay attention - limited upside

The 3 months correlation between UBS and Global is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Global X MLP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X MLP 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X MLP has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Global X go up and down completely randomly.

Pair Corralation between UBS ETRACS and Global X

Given the investment horizon of 90 days UBS ETRACS is expected to under-perform the Global X. In addition to that, UBS ETRACS is 3.56 times more volatile than Global X MLP. It trades about -0.04 of its total potential returns per unit of risk. Global X MLP is currently generating about 0.07 per unit of volatility. If you would invest  3,356  in Global X MLP on January 31, 2024 and sell it today you would earn a total of  1,483  from holding Global X MLP or generate 44.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	61.13%
Values	Daily Returns

UBS ETRACS   vs.  Global X MLP

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.

Global X MLP

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X MLP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with UBS ETRACS and Global X

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

The idea behind UBS ETRACS and Global X MLP 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.