Correlation Between UBS ETRACS and Credit Suisse

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

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

Diversification Opportunities for UBS ETRACS and Credit Suisse

-0.35

Correlation Coefficient

UBS ETRACS  Credit Suisse

Very good diversification

The 3 months correlation between UBS and Credit is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding UBS ETRACS and Credit Suisse X Links in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Suisse X 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 Credit Suisse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Suisse X has no effect on the direction of UBS ETRACS i.e., UBS ETRACS and Credit Suisse go up and down completely randomly.

Pair Corralation between UBS ETRACS and Credit Suisse

Given the investment horizon of 90 days UBS ETRACS is expected to generate 4.3 times more return on investment than Credit Suisse. However, UBS ETRACS is 4.3 times more volatile than Credit Suisse X Links. It trades about 0.24 of its potential returns per unit of risk. Credit Suisse X Links is currently generating about -0.06 per unit of risk. If you would invest  1,448  in UBS ETRACS on March 10, 2024 and sell it today you would earn a total of  253.00  from holding UBS ETRACS or generate 17.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

UBS ETRACS   vs.  Credit Suisse X Links

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 rather sound forward indicators, UBS ETRACS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Credit Suisse X

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Suisse X Links are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Credit Suisse is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with UBS ETRACS and Credit Suisse

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

The idea behind UBS ETRACS and Credit Suisse X Links 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.