Correlation Between Applied Materials, and Unity Software

Can any of the company-specific risk be diversified away by investing in both Applied Materials, and Unity Software 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 Applied Materials, and Unity Software into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Materials, and Unity Software, you can compare the effects of market volatilities on Applied Materials, and Unity Software 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 Applied Materials, with a short position of Unity Software. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials, and Unity Software.

Diversification Opportunities for Applied Materials, and Unity Software

-0.33

Correlation Coefficient

Applied Materials,  Unity Software

Very good diversification

The 3 months correlation between Applied and Unity is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials, and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and Applied Materials, 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 Applied Materials, are associated (or correlated) with Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of Applied Materials, i.e., Applied Materials, and Unity Software go up and down completely randomly.

Pair Corralation between Applied Materials, and Unity Software

Assuming the 90 days trading horizon Applied Materials, is expected to generate 0.63 times more return on investment than Unity Software. However, Applied Materials, is 1.59 times less risky than Unity Software. It trades about 0.06 of its potential returns per unit of risk. Unity Software is currently generating about 0.01 per unit of risk. If you would invest  5,505  in Applied Materials, on October 4, 2024 and sell it today you would earn a total of  4,623  from holding Applied Materials, or generate 83.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.79%
Values	Daily Returns

Applied Materials,  vs.  Unity Software

Applied Materials,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Applied Materials, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Unity Software

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unity Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Materials, and Unity Software

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

The idea behind Applied Materials, and Unity Software 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.