Correlation Between GP Investments and Unity Software

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

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

Diversification Opportunities for GP Investments and Unity Software

-0.14

Correlation Coefficient

GP Investments  Unity Software

Good diversification

The 3 months correlation between GPIV33 and Unity is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding GP Investments and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and GP Investments 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 GP Investments are associated (or correlated) with Unity Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Software has no effect on the direction of GP Investments i.e., GP Investments and Unity Software go up and down completely randomly.

Pair Corralation between GP Investments and Unity Software

Assuming the 90 days trading horizon GP Investments is expected to generate 3.65 times less return on investment than Unity Software. In addition to that, GP Investments is 1.11 times more volatile than Unity Software. It trades about 0.02 of its total potential returns per unit of risk. Unity Software is currently generating about 0.07 per unit of volatility. If you would invest  593.00  in Unity Software on September 23, 2024 and sell it today you would earn a total of  88.00  from holding Unity Software or generate 14.84% return on investment over 90 days.

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

GP Investments  vs.  Unity Software

GP Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GP Investments are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, GP Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Unity Software

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 5 (%) 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.

Pair Trading with GP Investments and Unity Software

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

The idea behind GP Investments and Unity Software 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.