Correlation Between Altair Engineering and Union Pacific
Can any of the company-specific risk be diversified away by investing in both Altair Engineering and Union Pacific 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 Union Pacific into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altair Engineering and Union Pacific, you can compare the effects of market volatilities on Altair Engineering and Union Pacific 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 Union Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altair Engineering and Union Pacific.
Diversification Opportunities for Altair Engineering and Union Pacific
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Altair and Union is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Altair Engineering and Union Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Pacific 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 Union Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Pacific has no effect on the direction of Altair Engineering i.e., Altair Engineering and Union Pacific go up and down completely randomly.
Pair Corralation between Altair Engineering and Union Pacific
Assuming the 90 days horizon Altair Engineering is expected to generate 6.96 times less return on investment than Union Pacific. But when comparing it to its historical volatility, Altair Engineering is 1.76 times less risky than Union Pacific. It trades about 0.08 of its potential returns per unit of risk. Union Pacific is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 22,060 in Union Pacific on October 28, 2024 and sell it today you would earn a total of 1,555 from holding Union Pacific or generate 7.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altair Engineering vs. Union Pacific
Performance |
| Timeline |
| Altair Engineering |
| Union Pacific |
Altair Engineering and Union Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altair Engineering and Union Pacific
The main advantage of trading using opposite Altair Engineering and Union Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altair Engineering position performs unexpectedly, Union Pacific 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 Union Pacific will offset losses from the drop in Union Pacific's long position.| Altair Engineering vs. Microsoft | Altair Engineering vs. ADYEN NV UNSPADR001 | Altair Engineering vs. Square Inc | Altair Engineering vs. CrowdStrike Holdings |
| Union Pacific vs. Canadian National Railway | Union Pacific vs. CSX Corporation | Union Pacific vs. Norfolk Southern | Union Pacific vs. MTR Limited |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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