Correlation Between CHINA EDUCATION and Unity Software

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

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

Diversification Opportunities for CHINA EDUCATION and Unity Software

-0.68

Correlation Coefficient

CHINA EDUCATION  Unity Software

Excellent diversification

The 3 months correlation between CHINA and Unity is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CHINA EDUCATION GROUP and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and CHINA EDUCATION 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 CHINA EDUCATION GROUP 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 CHINA EDUCATION i.e., CHINA EDUCATION and Unity Software go up and down completely randomly.

Pair Corralation between CHINA EDUCATION and Unity Software

Assuming the 90 days horizon CHINA EDUCATION GROUP is expected to generate 1.16 times more return on investment than Unity Software. However, CHINA EDUCATION is 1.16 times more volatile than Unity Software. It trades about 0.02 of its potential returns per unit of risk. Unity Software is currently generating about 0.01 per unit of risk. If you would invest  37.00  in CHINA EDUCATION GROUP on October 11, 2024 and sell it today you would earn a total of  2.00  from holding CHINA EDUCATION GROUP or generate 5.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

CHINA EDUCATION GROUP  vs.  Unity Software

CHINA EDUCATION GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHINA EDUCATION GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Unity Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Unity Software reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHINA EDUCATION and Unity Software

The main advantage of trading using opposite CHINA EDUCATION and Unity Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA EDUCATION 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 CHINA EDUCATION GROUP 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.