Correlation Between Unity Software and InterContinental

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

By analyzing existing cross correlation between Unity Software and InterContinental Hotels Group, you can compare the effects of market volatilities on Unity Software and InterContinental 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 InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unity Software and InterContinental.

Diversification Opportunities for Unity Software and InterContinental

-0.63

Correlation Coefficient

Unity Software  InterContinental

Excellent diversification

The 3 months correlation between Unity and InterContinental is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Unity Software i.e., Unity Software and InterContinental go up and down completely randomly.

Pair Corralation between Unity Software and InterContinental

Taking into account the 90-day investment horizon Unity Software is expected to generate 4.29 times more return on investment than InterContinental. However, Unity Software is 4.29 times more volatile than InterContinental Hotels Group. It trades about 0.04 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.02 per unit of risk. If you would invest  2,425  in Unity Software on December 2, 2024 and sell it today you would earn a total of  139.00  from holding Unity Software or generate 5.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Unity Software  vs.  InterContinental Hotels Group

Unity Software

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Unity Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

InterContinental Hotels

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, InterContinental is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Unity Software and InterContinental

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

The idea behind Unity Software and InterContinental Hotels Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.