Correlation Between Unity Software and Preferred Bank

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

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

Diversification Opportunities for Unity Software and Preferred Bank

0.7

Correlation Coefficient

Unity Software  Preferred Bank

Poor diversification

The 3 months correlation between Unity and Preferred is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank 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 Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of Unity Software i.e., Unity Software and Preferred Bank go up and down completely randomly.

Pair Corralation between Unity Software and Preferred Bank

Assuming the 90 days horizon Unity Software is expected to generate 2.48 times more return on investment than Preferred Bank. However, Unity Software is 2.48 times more volatile than Preferred Bank. It trades about 0.16 of its potential returns per unit of risk. Preferred Bank is currently generating about 0.09 per unit of risk. If you would invest  1,957  in Unity Software on April 24, 2025 and sell it today you would earn a total of  952.00  from holding Unity Software or generate 48.65% return on investment over 90 days.

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

Unity Software  vs.  Preferred Bank

Unity Software

Risk-Adjusted Performance

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. Despite nearly uncertain basic indicators, Unity Software reported solid returns over the last few months and may actually be approaching a breakup point.

Preferred Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Preferred Bank may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Unity Software and Preferred Bank

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

The idea behind Unity Software and Preferred Bank 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.