Correlation Between Air New and Altair Engineering
Can any of the company-specific risk be diversified away by investing in both Air New 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 Air New and Altair Engineering into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air New Zealand and Altair Engineering, you can compare the effects of market volatilities on Air New 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 Air New with a short position of Altair Engineering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air New and Altair Engineering.
Diversification Opportunities for Air New and Altair Engineering
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Air and Altair is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Air New Zealand and Altair Engineering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair Engineering and Air New 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 Air New Zealand 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 Air New i.e., Air New and Altair Engineering go up and down completely randomly.
Pair Corralation between Air New and Altair Engineering
Assuming the 90 days trading horizon Air New Zealand is expected to under-perform the Altair Engineering. But the stock apears to be less risky and, when comparing its historical volatility, Air New Zealand is 1.3 times less risky than Altair Engineering. The stock trades about -0.01 of its potential returns per unit of risk. The Altair Engineering is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 6,500 in Altair Engineering on August 24, 2024 and sell it today you would earn a total of 3,350 from holding Altair Engineering or generate 51.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Air New Zealand vs. Altair Engineering
Performance |
| Timeline |
| Air New Zealand |
| Altair Engineering |
Air New and Altair Engineering Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air New and Altair Engineering
The main advantage of trading using opposite Air New and Altair Engineering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air New 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 Air New Zealand 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.| Altair Engineering vs. Microsoft | Altair Engineering vs. Adobe Inc | Altair Engineering vs. ADYEN NV UNSPADR001 |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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