Correlation Between Shopify and Unity Software

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

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

Diversification Opportunities for Shopify and Unity Software

0.75

Correlation Coefficient

Shopify  Unity Software

Poor diversification

The 3 months correlation between Shopify and Unity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Shopify and Unity Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Software and Shopify 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 Shopify 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 Shopify i.e., Shopify and Unity Software go up and down completely randomly.

Pair Corralation between Shopify and Unity Software

Given the investment horizon of 90 days Shopify is expected to under-perform the Unity Software. In addition to that, Shopify is 1.35 times more volatile than Unity Software. It trades about -0.15 of its total potential returns per unit of risk. Unity Software is currently generating about -0.14 per unit of volatility. If you would invest  2,598  in Unity Software on February 11, 2024 and sell it today you would lose (429.00) from holding Unity Software or give up 16.51% of portfolio value over 90 days.

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

Shopify  vs.  Unity Software

Shopify

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shopify has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Unity Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unity Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Shopify and Unity Software

The main advantage of trading using opposite Shopify and Unity Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shopify 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 Shopify 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.