Correlation Between Unity Software and IShares Small

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

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

Diversification Opportunities for Unity Software and IShares Small

-0.02

Correlation Coefficient

Unity Software  IShares Small

Good diversification

The 3 months correlation between Unity and IShares is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and iShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Small Cap 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 IShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Small Cap has no effect on the direction of Unity Software i.e., Unity Software and IShares Small go up and down completely randomly.

Pair Corralation between Unity Software and IShares Small

Taking into account the 90-day investment horizon Unity Software is expected to generate 4.94 times more return on investment than IShares Small. However, Unity Software is 4.94 times more volatile than iShares Small Cap. It trades about 0.02 of its potential returns per unit of risk. iShares Small Cap is currently generating about -0.08 per unit of risk. If you would invest  2,284  in Unity Software on December 27, 2024 and sell it today you would lose (77.00) from holding Unity Software or give up 3.37% of portfolio value over 90 days.

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

Unity Software  vs.  iShares Small Cap

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.

iShares Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, IShares Small is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Unity Software and IShares Small

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

The idea behind Unity Software and iShares Small Cap 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.