Correlation Between Unity Software and American Aires

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

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

Diversification Opportunities for Unity Software and American Aires

-0.49

Correlation Coefficient

Unity Software  American Aires

Very good diversification

The 3 months correlation between Unity and American is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and American Aires in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Aires and Unity Software 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 Unity Software are associated (or correlated) with American Aires. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Aires has no effect on the direction of Unity Software i.e., Unity Software and American Aires go up and down completely randomly.

Pair Corralation between Unity Software and American Aires

Taking into account the 90-day investment horizon Unity Software is expected to under-perform the American Aires. But the stock apears to be less risky and, when comparing its historical volatility, Unity Software is 4.61 times less risky than American Aires. The stock trades about -0.01 of its potential returns per unit of risk. The American Aires is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  14.00  in American Aires on October 31, 2024 and sell it today you would earn a total of  2.00  from holding American Aires or generate 14.29% return on investment over 90 days.

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

Unity Software  vs.  American Aires

Unity Software

Risk-Adjusted Performance

5 of 100

Insignificant

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. In spite of comparatively unsteady basic indicators, Unity Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Aires

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Aires has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, American Aires is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Unity Software and American Aires

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

The idea behind Unity Software and American Aires 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.