Correlation Between Unity Software and Medallion Resources

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

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

Diversification Opportunities for Unity Software and Medallion Resources

-0.36

Correlation Coefficient

Unity Software  Medallion Resources

Very good diversification

The 3 months correlation between Unity and Medallion is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Medallion Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Resources 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 Medallion Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Resources has no effect on the direction of Unity Software i.e., Unity Software and Medallion Resources go up and down completely randomly.

Pair Corralation between Unity Software and Medallion Resources

Taking into account the 90-day investment horizon Unity Software is expected to under-perform the Medallion Resources. But the stock apears to be less risky and, when comparing its historical volatility, Unity Software is 3.84 times less risky than Medallion Resources. The stock trades about -0.02 of its potential returns per unit of risk. The Medallion Resources is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6.61  in Medallion Resources on September 3, 2024 and sell it today you would lose (1.61) from holding Medallion Resources or give up 24.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.76%
Values	Daily Returns

Unity Software  vs.  Medallion Resources

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.

Medallion Resources

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Medallion Resources are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medallion Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Software and Medallion Resources

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

The idea behind Unity Software and Medallion Resources 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.