Correlation Between Unity Software and British American
Can any of the company-specific risk be diversified away by investing in both Unity Software and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unity Software and British American Tobacco, you can compare the effects of market volatilities on Unity Software and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unity Software and British American.
Diversification Opportunities for Unity Software and British American
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Unity and British is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Unity Software i.e., Unity Software and British American go up and down completely randomly.
Pair Corralation between Unity Software and British American
Assuming the 90 days trading horizon Unity Software is expected to generate 1.01 times less return on investment than British American. In addition to that, Unity Software is 2.48 times more volatile than British American Tobacco. It trades about 0.02 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.05 per unit of volatility. If you would invest 3,076 in British American Tobacco on November 27, 2024 and sell it today you would earn a total of 1,326 from holding British American Tobacco or generate 43.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unity Software vs. British American Tobacco
Performance |
| Timeline |
| Unity Software |
| British American Tobacco |
Unity Software and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unity Software and British American
The main advantage of trading using opposite Unity Software and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Software position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Unity Software vs. Microchip Technology Incorporated | Unity Software vs. Deutsche Bank Aktiengesellschaft | Unity Software vs. Sumitomo Mitsui Financial | Unity Software vs. JB Hunt Transport |
| British American vs. GP Investments | British American vs. Broadridge Financial Solutions, | British American vs. Fair Isaac | British American vs. CVS Health |
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.
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