Correlation Between Altair Engineering and Microsoft
Can any of the company-specific risk be diversified away by investing in both Altair Engineering and Microsoft 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 Microsoft into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altair Engineering and Microsoft, you can compare the effects of market volatilities on Altair Engineering and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altair Engineering and Microsoft.
Diversification Opportunities for Altair Engineering and Microsoft
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Altair and Microsoft is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Altair Engineering i.e., Altair Engineering and Microsoft go up and down completely randomly.
Pair Corralation between Altair Engineering and Microsoft
Assuming the 90 days horizon Altair Engineering is expected to generate 0.45 times more return on investment than Microsoft. However, Altair Engineering is 2.21 times less risky than Microsoft. It trades about 0.24 of its potential returns per unit of risk. Microsoft is currently generating about 0.04 per unit of risk. If you would invest 9,950 in Altair Engineering on October 30, 2024 and sell it today you would earn a total of 550.00 from holding Altair Engineering or generate 5.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altair Engineering vs. Microsoft
Performance |
| Timeline |
| Altair Engineering |
| Microsoft |
Altair Engineering and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altair Engineering and Microsoft
The main advantage of trading using opposite Altair Engineering and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altair Engineering position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Altair Engineering vs. Canon Marketing Japan | Altair Engineering vs. Fast Retailing Co | Altair Engineering vs. CODERE ONLINE LUX | Altair Engineering vs. SALESFORCE INC CDR |
| Microsoft vs. FAST RETAIL ADR | Microsoft vs. SCANDMEDICAL SOLDK 040 | Microsoft vs. CREO MEDICAL GRP | Microsoft vs. ONWARD MEDICAL BV |
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.
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