Correlation Between Santech Holdings and Unity Software

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

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

Diversification Opportunities for Santech Holdings and Unity Software

-0.04

Correlation Coefficient

Santech Holdings  Unity Software

Good diversification

The 3 months correlation between Santech and Unity is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Santech Holdings Limited and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and Santech Holdings 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 Santech Holdings Limited 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 Santech Holdings i.e., Santech Holdings and Unity Software go up and down completely randomly.

Pair Corralation between Santech Holdings and Unity Software

Given the investment horizon of 90 days Santech Holdings Limited is expected to generate 7.1 times more return on investment than Unity Software. However, Santech Holdings is 7.1 times more volatile than Unity Software. It trades about 0.03 of its potential returns per unit of risk. Unity Software is currently generating about 0.02 per unit of risk. If you would invest  542.00  in Santech Holdings Limited on September 14, 2024 and sell it today you would lose (465.90) from holding Santech Holdings Limited or give up 85.96% of portfolio value over 90 days.

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

Santech Holdings Limited  vs.  Unity Software

Santech Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Santech Holdings Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Santech Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Unity Software

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Unity Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Santech Holdings and Unity Software

The main advantage of trading using opposite Santech Holdings and Unity Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Santech Holdings 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 Santech Holdings Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.