Correlation Between UBS ETRACS and Dimensional ETF

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

Diversification Opportunities for UBS ETRACS and Dimensional ETF

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between UBS and Dimensional is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Dimensional ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional ETF Trust 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 Dimensional ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional ETF Trust has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Dimensional ETF go up and down completely randomly.

Pair Corralation between UBS ETRACS and Dimensional ETF

Given the investment horizon of 90 days UBS ETRACS is expected to generate 3.79 times more return on investment than Dimensional ETF. However, UBS ETRACS is 3.79 times more volatile than Dimensional ETF Trust. It trades about 0.31 of its potential returns per unit of risk. Dimensional ETF Trust is currently generating about 0.22 per unit of risk. If you would invest  1,333  in UBS ETRACS on February 24, 2024 and sell it today you would earn a total of  283.00  from holding UBS ETRACS or generate 21.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

UBS ETRACS   vs.  Dimensional ETF Trust

 Performance 
       Timeline  
UBS ETRACS 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 conflicting performance in the last few months, the Etf's forward indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.
Dimensional ETF Trust 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Dimensional ETF Trust are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Dimensional ETF may actually be approaching a critical reversion point that can send shares even higher in June 2024.

UBS ETRACS and Dimensional ETF Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with UBS ETRACS and Dimensional ETF

The main advantage of trading using opposite UBS ETRACS and Dimensional ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UBS ETRACS position performs unexpectedly, Dimensional ETF 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 Dimensional ETF will offset losses from the drop in Dimensional ETF's long position.
The idea behind UBS ETRACS and Dimensional ETF Trust 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.
Check out your portfolio center.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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