Correlation Between Unity Software and NVIDIA

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

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

Diversification Opportunities for Unity Software and NVIDIA

0.48

Correlation Coefficient

Unity Software  NVIDIA

Very weak diversification

The 3 months correlation between Unity and NVIDIA is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Unity Software i.e., Unity Software and NVIDIA go up and down completely randomly.

Pair Corralation between Unity Software and NVIDIA

Assuming the 90 days trading horizon Unity Software is expected to generate 611.97 times less return on investment than NVIDIA. But when comparing it to its historical volatility, Unity Software is 22.45 times less risky than NVIDIA. It trades about 0.0 of its potential returns per unit of risk. NVIDIA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  567.00  in NVIDIA on October 9, 2024 and sell it today you would earn a total of  1,217  from holding NVIDIA or generate 214.64% return on investment over 90 days.

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

Unity Software  vs.  NVIDIA

Unity Software

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 9 (%) 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.

NVIDIA

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, NVIDIA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Software and NVIDIA

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

The idea behind Unity Software and NVIDIA 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.