Correlation Between Unity Software and Telefnica

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

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

Diversification Opportunities for Unity Software and Telefnica

0.68

Correlation Coefficient

Unity Software  Telefnica

Poor diversification

The 3 months correlation between Unity and Telefnica is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Telefnica SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telefnica SA 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 Telefnica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telefnica SA has no effect on the direction of Unity Software i.e., Unity Software and Telefnica go up and down completely randomly.

Pair Corralation between Unity Software and Telefnica

Assuming the 90 days trading horizon Unity Software is expected to generate 4.79 times more return on investment than Telefnica. However, Unity Software is 4.79 times more volatile than Telefnica SA. It trades about 0.14 of its potential returns per unit of risk. Telefnica SA is currently generating about 0.29 per unit of risk. If you would invest  620.00  in Unity Software on December 4, 2024 and sell it today you would earn a total of  118.00  from holding Unity Software or generate 19.03% return on investment over 90 days.

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

Unity Software  vs.  Telefnica SA

Unity Software

Risk-Adjusted Performance

Very Weak

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

Telefnica SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Telefnica SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Telefnica 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 Telefnica

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

The idea behind Unity Software and Telefnica SA 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.