Correlation Between Alaska Air and Altair Engineering
Can any of the company-specific risk be diversified away by investing in both Alaska Air and Altair Engineering 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 Alaska Air and Altair Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alaska Air Group and Altair Engineering, you can compare the effects of market volatilities on Alaska Air and Altair Engineering 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 Alaska Air with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alaska Air and Altair Engineering.
Diversification Opportunities for Alaska Air and Altair Engineering
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Alaska and Altair is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Alaska Air Group and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Alaska Air 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 Alaska Air Group are associated (or correlated) with Altair Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair Engineering has no effect on the direction of Alaska Air i.e., Alaska Air and Altair Engineering go up and down completely randomly.
Pair Corralation between Alaska Air and Altair Engineering
Assuming the 90 days trading horizon Alaska Air Group is expected to generate 1.46 times more return on investment than Altair Engineering. However, Alaska Air is 1.46 times more volatile than Altair Engineering. It trades about 0.33 of its potential returns per unit of risk. Altair Engineering is currently generating about 0.1 per unit of risk. If you would invest 4,201 in Alaska Air Group on August 26, 2024 and sell it today you would earn a total of 795.00 from holding Alaska Air Group or generate 18.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alaska Air Group vs. Altair Engineering
Performance |
| Timeline |
| Alaska Air Group |
| Altair Engineering |
Alaska Air and Altair Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alaska Air and Altair Engineering
The main advantage of trading using opposite Alaska Air and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alaska Air position performs unexpectedly, Altair Engineering 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 Altair Engineering will offset losses from the drop in Altair Engineering's long position.The idea behind Alaska Air Group and Altair Engineering 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |