Correlation Between Unity Software and Lockheed Martin

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

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

Diversification Opportunities for Unity Software and Lockheed Martin

-0.2

Correlation Coefficient

Unity Software  Lockheed Martin

Good diversification

The 3 months correlation between Unity and Lockheed is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Unity Software i.e., Unity Software and Lockheed Martin go up and down completely randomly.

Pair Corralation between Unity Software and Lockheed Martin

Taking into account the 90-day investment horizon Unity Software is expected to generate 2.08 times more return on investment than Lockheed Martin. However, Unity Software is 2.08 times more volatile than Lockheed Martin. It trades about 0.16 of its potential returns per unit of risk. Lockheed Martin is currently generating about -0.02 per unit of risk. If you would invest  1,891  in Unity Software on September 12, 2024 and sell it today you would earn a total of  749.00  from holding Unity Software or generate 39.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Unity Software  vs.  Lockheed Martin

Unity Software

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 12 (%) 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.

Lockheed Martin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lockheed Martin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Unity Software and Lockheed Martin

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

The idea behind Unity Software and Lockheed Martin 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.