Correlation Between Unity Software and General Electric
Can any of the company-specific risk be diversified away by investing in both Unity Software and General Electric 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 General Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unity Software and General Electric, you can compare the effects of market volatilities on Unity Software and General Electric 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 General Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unity Software and General Electric.
Diversification Opportunities for Unity Software and General Electric
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unity and General is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Electric 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 General Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Electric has no effect on the direction of Unity Software i.e., Unity Software and General Electric go up and down completely randomly.
Pair Corralation between Unity Software and General Electric
Assuming the 90 days trading horizon Unity Software is expected to generate 2.82 times less return on investment than General Electric. In addition to that, Unity Software is 1.53 times more volatile than General Electric. It trades about 0.02 of its total potential returns per unit of risk. General Electric is currently generating about 0.08 per unit of volatility. If you would invest 44,158 in General Electric on September 5, 2024 and sell it today you would earn a total of 65,549 from holding General Electric or generate 148.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Unity Software vs. General Electric
Performance |
| Timeline |
| Unity Software |
| General Electric |
Unity Software and General Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unity Software and General Electric
The main advantage of trading using opposite Unity Software and General Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Software position performs unexpectedly, General Electric 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 General Electric will offset losses from the drop in General Electric's long position.The idea behind Unity Software and General Electric 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.| General Electric vs. TAL Education Group | General Electric vs. Unity Software | General Electric vs. Prudential Financial | General Electric vs. Capital One Financial |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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