Correlation Between Unity Software and DAX Midcap

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Can any of the company-specific risk be diversified away by investing in both Unity Software and DAX Midcap 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 DAX Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unity Software and DAX Midcap, you can compare the effects of market volatilities on Unity Software and DAX Midcap 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 DAX Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unity Software and DAX Midcap.

Diversification Opportunities for Unity Software and DAX Midcap

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Unity and DAX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and DAX Midcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAX Midcap 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 DAX Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAX Midcap has no effect on the direction of Unity Software i.e., Unity Software and DAX Midcap go up and down completely randomly.
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Pair Corralation between Unity Software and DAX Midcap

Taking into account the 90-day investment horizon Unity Software is expected to under-perform the DAX Midcap. In addition to that, Unity Software is 3.81 times more volatile than DAX Midcap. It trades about -0.03 of its total potential returns per unit of risk. DAX Midcap is currently generating about 0.0 per unit of volatility. If you would invest  2,806,794  in DAX Midcap on September 10, 2024 and sell it today you would lose (77,703) from holding DAX Midcap or give up 2.77% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.33%
ValuesDaily Returns

Unity Software  vs.  DAX Midcap

 Performance 
       Timeline  

Unity Software and DAX Midcap Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Unity Software and DAX Midcap

The main advantage of trading using opposite Unity Software and DAX Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unity Software position performs unexpectedly, DAX Midcap 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 DAX Midcap will offset losses from the drop in DAX Midcap's long position.
The idea behind Unity Software and DAX Midcap 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.
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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