Correlation Between Air Products and Unity Software

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

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

Diversification Opportunities for Air Products and Unity Software

0.65

Correlation Coefficient

Air Products  Unity Software

Poor diversification

The 3 months correlation between Air and Unity is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Air Products and and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and Air Products 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 Air Products and 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 Air Products i.e., Air Products and Unity Software go up and down completely randomly.

Pair Corralation between Air Products and Unity Software

Assuming the 90 days trading horizon Air Products and is expected to under-perform the Unity Software. But the stock apears to be less risky and, when comparing its historical volatility, Air Products and is 2.67 times less risky than Unity Software. The stock trades about -0.34 of its potential returns per unit of risk. The Unity Software is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  798.00  in Unity Software on October 5, 2024 and sell it today you would lose (46.00) from holding Unity Software or give up 5.76% of portfolio value over 90 days.

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

Air Products and  vs.  Unity Software

Air Products

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Air Products sustained solid returns over the last few months and may actually be approaching a breakup point.

Unity Software

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 9 (%) 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 Air Products and Unity Software

The main advantage of trading using opposite Air Products and Unity Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Products 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 Air Products and 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.