Correlation Between Unity Software and Nordic Aqua

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

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

Diversification Opportunities for Unity Software and Nordic Aqua

0.35

Correlation Coefficient

Unity Software  Nordic Aqua

Weak diversification

The 3 months correlation between Unity and Nordic is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Nordic Aqua Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Aqua Partners 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 Nordic Aqua. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Aqua Partners has no effect on the direction of Unity Software i.e., Unity Software and Nordic Aqua go up and down completely randomly.

Pair Corralation between Unity Software and Nordic Aqua

Taking into account the 90-day investment horizon Unity Software is expected to generate 3.71 times less return on investment than Nordic Aqua. In addition to that, Unity Software is 2.5 times more volatile than Nordic Aqua Partners. It trades about 0.01 of its total potential returns per unit of risk. Nordic Aqua Partners is currently generating about 0.12 per unit of volatility. If you would invest  7,400  in Nordic Aqua Partners on December 28, 2024 and sell it today you would earn a total of  1,250  from holding Nordic Aqua Partners or generate 16.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Unity Software  vs.  Nordic Aqua Partners

Unity Software

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Unity Software is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Nordic Aqua Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nordic Aqua Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Nordic Aqua disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Software and Nordic Aqua

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

The idea behind Unity Software and Nordic Aqua Partners 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.