Correlation Between MicroSectors Gold and UBS ETRACS

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Can any of the company-specific risk be diversified away by investing in both MicroSectors Gold and UBS ETRACS 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 MicroSectors Gold and UBS ETRACS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors Gold Miners and UBS ETRACS , you can compare the effects of market volatilities on MicroSectors Gold and UBS ETRACS 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 MicroSectors Gold with a short position of UBS ETRACS. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors Gold and UBS ETRACS.

Diversification Opportunities for MicroSectors Gold and UBS ETRACS

-0.01
  Correlation Coefficient

Good diversification

The 3 months correlation between MicroSectors and UBS is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors Gold Miners and UBS ETRACS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS ETRACS and MicroSectors Gold 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 MicroSectors Gold Miners are associated (or correlated) with UBS ETRACS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS ETRACS has no effect on the direction of MicroSectors Gold i.e., MicroSectors Gold and UBS ETRACS go up and down completely randomly.

Pair Corralation between MicroSectors Gold and UBS ETRACS

Given the investment horizon of 90 days MicroSectors Gold Miners is expected to generate 2.17 times more return on investment than UBS ETRACS. However, MicroSectors Gold is 2.17 times more volatile than UBS ETRACS . It trades about 0.18 of its potential returns per unit of risk. UBS ETRACS is currently generating about 0.32 per unit of risk. If you would invest  1,945  in MicroSectors Gold Miners on March 18, 2024 and sell it today you would earn a total of  500.00  from holding MicroSectors Gold Miners or generate 25.71% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MicroSectors Gold Miners  vs.  UBS ETRACS

 Performance 
       Timeline  
MicroSectors Gold Miners 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in MicroSectors Gold Miners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, MicroSectors Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.
UBS ETRACS 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in UBS ETRACS are ranked lower than 6 (%) 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.

MicroSectors Gold and UBS ETRACS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with MicroSectors Gold and UBS ETRACS

The main advantage of trading using opposite MicroSectors Gold and UBS ETRACS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors Gold position performs unexpectedly, UBS ETRACS 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 UBS ETRACS will offset losses from the drop in UBS ETRACS's long position.
The idea behind MicroSectors Gold Miners and UBS ETRACS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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