Correlation Between Altair Engineering and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Altair Engineering and Guangdong Investment 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 Altair Engineering and Guangdong Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altair Engineering and Guangdong Investment Limited, you can compare the effects of market volatilities on Altair Engineering and Guangdong Investment 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 Altair Engineering with a short position of Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altair Engineering and Guangdong Investment.
Diversification Opportunities for Altair Engineering and Guangdong Investment
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Altair and Guangdong is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Altair Engineering 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 Altair Engineering are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Altair Engineering i.e., Altair Engineering and Guangdong Investment go up and down completely randomly.
Pair Corralation between Altair Engineering and Guangdong Investment
Assuming the 90 days horizon Altair Engineering is expected to generate 0.71 times more return on investment than Guangdong Investment. However, Altair Engineering is 1.41 times less risky than Guangdong Investment. It trades about 0.1 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.06 per unit of risk. If you would invest 9,550 in Altair Engineering on August 26, 2024 and sell it today you would earn a total of 350.00 from holding Altair Engineering or generate 3.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altair Engineering vs. Guangdong Investment Limited
Performance |
| Timeline |
| Altair Engineering |
| Guangdong Investment |
Altair Engineering and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altair Engineering and Guangdong Investment
The main advantage of trading using opposite Altair Engineering and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altair Engineering position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.The idea behind Altair Engineering and Guangdong Investment Limited 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.| Guangdong Investment vs. BE Semiconductor Industries | Guangdong Investment vs. NXP Semiconductors NV | Guangdong Investment vs. SEKISUI CHEMICAL | Guangdong Investment vs. TIANDE CHEMICAL |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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