Correlation Between Unity Software and Shopify

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

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

Diversification Opportunities for Unity Software and Shopify

0.8

Correlation Coefficient

Unity Software  Shopify

Very poor diversification

The 3 months correlation between Unity and Shopify is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Unity Software and Shopify Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shopify Class A 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 Shopify. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shopify Class A has no effect on the direction of Unity Software i.e., Unity Software and Shopify go up and down completely randomly.

Pair Corralation between Unity Software and Shopify

Taking into account the 90-day investment horizon Unity Software is expected to generate 1.32 times more return on investment than Shopify. However, Unity Software is 1.32 times more volatile than Shopify Class A. It trades about 0.27 of its potential returns per unit of risk. Shopify Class A is currently generating about 0.24 per unit of risk. If you would invest  1,925  in Unity Software on April 21, 2025 and sell it today you would earn a total of  1,750  from holding Unity Software or generate 90.91% return on investment over 90 days.

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

Unity Software  vs.  Shopify Class A

Unity Software

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unity Software are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Unity Software unveiled solid returns over the last few months and may actually be approaching a breakup point.

Shopify Class A

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shopify Class A are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Shopify reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unity Software and Shopify

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

The idea behind Unity Software and Shopify Class A 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..