Correlation Between Unity Software and GALP ENERGADR

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

By analyzing existing cross correlation between Unity Software and GALP ENERGADR 15, you can compare the effects of market volatilities on Unity Software and GALP ENERGADR 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 GALP ENERGADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unity Software and GALP ENERGADR.

Diversification Opportunities for Unity Software and GALP ENERGADR

0.06

Correlation Coefficient

Unity Software  GALP ENERGADR

Significant diversification

The 3 months correlation between Unity and GALP is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and GALP ENERGADR 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGADR 15 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 GALP ENERGADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGADR 15 has no effect on the direction of Unity Software i.e., Unity Software and GALP ENERGADR go up and down completely randomly.

Pair Corralation between Unity Software and GALP ENERGADR

Assuming the 90 days horizon Unity Software is expected to generate 2.71 times more return on investment than GALP ENERGADR. However, Unity Software is 2.71 times more volatile than GALP ENERGADR 15. It trades about -0.01 of its potential returns per unit of risk. GALP ENERGADR 15 is currently generating about -0.08 per unit of risk. If you would invest  2,138  in Unity Software on December 19, 2024 and sell it today you would lose (238.00) from holding Unity Software or give up 11.13% of portfolio value over 90 days.

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

Unity Software  vs.  GALP ENERGADR 15

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 nearly stable basic indicators, Unity Software is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

GALP ENERGADR 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days GALP ENERGADR 15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Unity Software and GALP ENERGADR

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

The idea behind Unity Software and GALP ENERGADR 15 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.