Correlation Between Unity Software and Coty

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

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

Diversification Opportunities for Unity Software and Coty

0.18

Correlation Coefficient

Unity Software  Coty

Average diversification

The 3 months correlation between Unity and Coty is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Coty Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coty Inc 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 Coty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coty Inc has no effect on the direction of Unity Software i.e., Unity Software and Coty go up and down completely randomly.

Pair Corralation between Unity Software and Coty

Assuming the 90 days trading horizon Unity Software is expected to generate 2.04 times more return on investment than Coty. However, Unity Software is 2.04 times more volatile than Coty Inc. It trades about -0.01 of its potential returns per unit of risk. Coty Inc is currently generating about -0.08 per unit of risk. If you would invest  828.00  in Unity Software on October 22, 2024 and sell it today you would lose (177.00) from holding Unity Software or give up 21.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.57%
Values	Daily Returns

Unity Software  vs.  Coty Inc

Unity Software

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unity Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Coty Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coty Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Coty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Unity Software and Coty

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

The idea behind Unity Software and Coty Inc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.